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Luxembourg: Taxation - Tax Administration Guidelines on Islamic Finance
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(Jan. 29, 2010) The tax administration of Luxembourg issued a circular on January 12, 2010, on taxation of Islamic finance instruments. (Circular L.G.A. No. 55, cited in René Offermanns, Luxembourg: Guidelines on Islamic Finance Published, IBFD TAX NEWS SERVICE, Feb. 1, 2010, available by subscription from taxnewsservice@ibfd.org.) The financial products discussed in the document are the murabaha and the sukuk.
A murabaha is an "Islamic financing structure, where an intermediary buys a property with free and clear title to it. The intermediary and prospective buyer then agree upon a sale price (including an agreed upon profit for the intermediary) that can be made through a series of installments, or as a lump sum payment." (What Does Murabaha Mean?, INVESTOPEDIA, http://www.inves
topedia.com/terms/m/murabaha.asp (last visited Feb. 3, 2010).) The provider's gain is fully taxable and is deemed to occur at the time the sales agreement is signed. The Circular does state, however, that if a part of the gain can be treated as remuneration for the deferral of payment by the final buyer, that part of the tax payment can be spread over the payment term. This deferral of payment over a term can be done only if:
1) the agreement indicates that the finance provider purchased the asset intending to resell it to a client within six months;
2) there are distinctions between the remuneration received for deferral of payment, the commission received for arranging the deal, and the purchase price of the asset;
3) clear statement of the remuneration to the finance provider is made and accepted by both parties;
4) the agreement states that the remuneration to the finance provider is given in return for the final purchaser being permitted to pay in installments; and
5) the remuneration is spread over the term of the deferred payment, for accounting and tax purposes. (Id.)
Sukok refers to financial certificates similar to bonds, but that comply with Islamic law. Since in Sharia law "the traditional Western interest paying bond structure is not permissible, the issuer of a sukuk sells an investor group the certificate, who then rents it back to the issuer for a predetermined rental fee." (What Does Sukuk Mean? INVESTOPEDIA, http://www.investopedia.com/terms/s/sukuk.asp<
/span> (last visited Feb. 1, 2010).) The Circular also states that, for tax purposes, a sukuk should have the same treatment as a conventional bond. Payments received are taxed the way interest payments on a conventional debt instrument are taxed. Yield payments can be deducted, and tax payments are not withheld. (IBFD, supra.)
- Author: Constance Johnson
- Topic: Taxation
More on this topic - Jurisdiction: Luxembourg
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Canada: Terrorism - Supreme Court Rules in Guantanamo Detainee Case
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(Jan. 29, 2010) On January 29, 2010, the Supreme Court of Canada issued a decision in the case of a Canadian citizen being held by U.S. authorities in Guantanamo Bay. The Court ruled unanimously that the detainee, Omar Khadr, was entitled to a declaration that his rights under the Canadian Charter of Rights and Freedoms (Constitution Act, 1982, being Part B of the Canada Act, 1982, c. 11 (U.K.), available at http://laws-lois.j
ustice.gc.ca/eng/charter/Charter_index.html) had been violated , but that the Courts did not have jurisdiction to order the Prime Minister to request his repatriation.
Khadr was captured by U.S. forces in Afghanistan in 2002, after he had allegedly thrown a grenade that killed a U.S. soldier. He was 15 years old at the time of this incident. Since being transferred to Guantanamo Bay, Khadr has been charged with war crimes; he is being held for trial by a military commission. In 2003, Canadian officials questioned Khadr and shared the information given to them with U.S. authorities. While interrogating him, the Canadian officials were aware that Khadr had been subjected to a sleep deprivation technique known as "the frequent flyer program." In 2008, the Canadian Supreme Court ruled that the Canadian officials involved had violated Khadr's constitutional right to fundamental justice by violating international human rights norms, and it ordered the officials to give transcripts of the interviews to Khadr. (Khadr v. Canada, [2008] 2 S.C.R. 125, available at http://
scc.lexum.umontreal.ca/en/2008/2008scc28/2008scc28.html.)
On July 10, 2008, the Prime Minister of Canada stated that the country would not seek to have Khadr returned to Canada, but would seek assurance of good treatment. In August 2008, Khadr argued that because his constitutional rights had been violated by Canadian officials, the government of Canada was obliged to request his repatriation. A judge of the Federal Court agreed with this submission, and his decision was upheld by the Federal Court of Appeal. (Khadr v. Canada, 2009 F.C. 405, available at http://
decisions.fct-cf.gc.ca/en/2008/2008fc807/2008fc807.html.) These two decisions were but two of the fourteen that the Federal Court and the Federal Court of Appeal have already issued in the Khadr case. (See Federal Court, Federal Court Decisions, http://decisions.fct-cf.gc.ca/fc-eliisa/search?language=EN&courtScope=f
c&all=&phrase=&any=&without=&title=khadr&citation=&exactDate=&
dateFrom=&dateTo=(last visited Feb. 2, 2010).)
The Canadian Supreme Court disagreed with the Federal Court of Appeal on the grounds that it was bound to respect the prerogative powers of the executive over the conduct of foreign relations. However, it did state that it could issue a declaration that "will provide the legal framework for the executive to exercise its functions and to consider what actions to take in respect of Mr. Khadr, in conformity with the Charter" of Rights and Freedoms. (Canada (Prime Minister) v. Khadr, 2010 S.C.C. 3, available at http://scc.lexum.umontreal.ca/en/2010/2010scc3/2010scc3.html.)
- Author: Stephen Clarke
- Topic: Terrorism
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- Jurisdiction: Canada
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Australia: Securities markets - Securities Regulator to Have Greater Powers, Tougher Penalties
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(Jan. 29, 2010) On January 28, 2010, the Australian federal government announced plans to increase the maximum penalties that can be imposed for market misconduct. The Australian Securities and Investment Commission (ASIC) will also have greater powers to investigate and prosecute market offenses. (Press Release, Hon. Chris Bowen, Greater Powers to the Corporate Regulator to Pursue Market Misconduct (Jan. 28, 2010), available at http://mfsscl.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2010/0
08.htm&pageID=003&min=ceba&Year=&DocType.)
- The maximum pecuniary penalty for individuals would be increased from the current AU$22,000 (or AU$220,000 for insider trading) to AU$500,000 (US$441,526) or three times the profit made or loss avoided through the commission of the offense;
- The maximum term of imprisonment would be doubled from five to ten years;
- For corporations, the maximum penalty would increase from AU$1 million to AU$5 million (US$4.4 million), or three times the profit made or loss avoided, or 10% of the annual turnover of the corporation in the relevant period;
- The Telecommunications (Interception and Access) Act 1979 would be amended to include market and insider trading offenses in the list of serious offenses for which interception can be used in an investigation; and
- ASIC's existing search warrant powers would be amended to allow it to execute a warrant without needing to first issue a notice to produce. (Id.)
In explaining the reasons for the proposals, the Minister for Financial Services, Superannuation and Corporate Law, Hon. Chris Bowen, said that the number of trades referred by market operator ASX Limited to ASIC is "substantial enough to warrant my concern and the government's concern." (Rachel Pannett, Chris Bowen Unveils Changes to Give Securities Regulator More Power to Punish, THE AUSTRALIAN, Jan. 28, 2010, available at http://www.theaustralian.com.au/business/industry-sectors/chris-bowen-un
veils-changes-to-give-securities-regulator-more-power-to-punish/stor
y-e6frg96f-1225824402938.) Another cause for concern is the "noticeable trend" of share prices increasing prior to market sensitive announcements being made. (Id.) Some commentators also believe that the outcomes of recent high profile court cases lost by ASIC might have been different if it had had more powers. (Elizabeth Knight, More Powers Do Not Mean More Convictions, THE AGE, Jan. 29, 2010, available at http://www.theage.com.au/business/more-powers-do-not-mean-more-convictio
ns-20100128-n1vq.html.)
The expanded powers would put ASIC in line with other regulators, including the Australian Competition and Consumer Commission. (Press Release, supra.) The Minister said that the changes "will ensure that ASIC is properly equipped to investigate and prosecute serious corporate misconduct, which has the potential to cause significant harm to the economy and investors." (Id.) He further stated that the changes "will bring Australia in line with the United States as the nation with the toughest penalties for these types of offences." (Michael Janda, Govt to Raise Fines, Jail Time for Corporate Crooks, ABC NEWS, Jan. 28, 2010, available at http://www.abc.net.au/news/stories/2010/01/28/2803589.htm.)
The proposed legislative changes will be released in draft form later in 2010. (Press Release, supra.)
- Author: Kelly Buchanan
- Topic: Securities markets
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- Jurisdiction: Australia
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Nepal: Constitutional law - : Legislature Passes Constitutional Amendment
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(Jan. 29, 2010) On January 28, 2010, Nepal's legislature passed the seventh amendment to the country's interim constitution. The amendment, which passed with a two-thirds majority, will permit the president, vice president, prime minister, and other high-ranking officials to take their oaths of office in their native languages. The issue became politically important when Parmananda Jha refused to take the oath of office for the vice presidency in Nepali, using Hindi instead. In 2009, the Supreme Court invalidated the oath. In addition to passing the amendment, the legislature reinstated Jha. (Seventh Amendment to Interim Constitution Passed, NEPAL NEWS.COM, Jan. 28, 2010, available at http://www.nepalnews.com/main/index.php/news-archive/1-top-story/3797-se
venth-amendment-to-interim-constitution-passed.html; Seventh Amendment to Interim Constitution on VP Post, THE HIMALAYAN, Jan. 28, 2010, available at http://www.thehimalayantimes.com/fullNews.php?headline=7th+amendment+in+
Interim+Constitution+on+VP+post&NewsID=224265&a=3.)
The interim constitution dates from 2007; it requires a two-thirds majority for amendment. (Art. 148 ¶ 2, Interim Constitution of Nepal, WORLD STATESMEN.ORG, http://www.worldstatesmen.org/Nepal_Interim_Constitution2007.pdf (last visited Jan. 28, 2010).)
- Author: Constance Johnson
- Topic: Constitutional law
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- Jurisdiction: Nepal
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Philippines: Elections - Supreme Court Stops Commission on Elections by Issuing TRO in Favor of LGBT Party
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(Jan. 29, 2010) On January 12, 2010, the Supreme Court of the Philippines issued a Temporary Restraining Order (TRO) to stop the Commission on Elections (COMELEC) from barring Ang Ladlad – a political group representing lesbian, gay, bisexual, and transgendered people in the Philippines – from appearing on the ballot for the May 2010 elections. (I.P. Pedrasa, SC Orders Homosexual Group's Inclusion in Ballot, BUSINESSWORLD BETA, ONLINE, Jan. 12 2010, available at http://www.bworld.com.ph/main/content.php?id=4469.)
Ang Ladlad brought its case to the Supreme Court after the COMELEC, in November 2009, cited moral grounds in order to justify its disqualification from the election. The petition stated that COMELEC violated constitutional guarantees, which preclude the use of religion in order to wield political or civil rights. (Id.)
The petition also mentions that the Philippines is a signatory of the International Covenant on Civil and Political Rights, which contains provisions against sexual discrimination. (For the text of the covenant, see International Covenant on Civil and Political Rights, Dec. 16, 1966, Office of the United Nations High Commissioner for Human Rights website, available at http://www2.ohchr.org/english/law/ccpr.htm.)
The Supreme Court issued the TRO via a press conference, in order to stop COMELEC from omitting Ang Ladlad from the ballot, since COMELEC's deadline to start printing the ballots was January 25, 2010. (Pedrasa, supra.)
- Author: Francisco Macías
- Topic: Elections
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- Jurisdiction: Philippines
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