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Luxembourg To Offer Sukuk This Year

by Ulrika Lomas, Lowtax.net, Brussels
17 July, 2014

The government of Luxembourg is set to offer Islamic bonds, known as sukuk, in the coming months, after parliament approved the relevant legislation on July 9, 2014.

The Ministry of Finance said that the parliamentary approval is "a milestone in the continuous development of Islamic finance in the Grand-Duchy of Luxembourg," and that it "underlines the political will to diversify and develop alternative markets within the financial services industry and establish the Grand-Duchy as an integrative and diversified world class financial services hub."

Luxembourg will be the second Western nation to offer an Islamic bond following an issuance in the United Kingdom at the end of June. The UK's GBP200m (USD342.7m) offering attracted GBP2.3bn of orders.

Shariah law precludes the payment or receipt of interest. As a result, the issuance of sukuk involves more complex structures to achieve a similar Shariah-compliant outcome as conventional bond issues, often using special purpose vehicles and multiple asset transfers. Without concessionary provisions for sukuk, their issuance may attract additional profits or property tax exposure, or stamp duty charges.

Luxembourg plans to issue EUR200m (USD271m) worth of sukuk, using income from government properties to pay out profits.

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