Russia drafts a bill on Islamic leasing
A bill eliminating legislative obstacles to the commission of leasing transactions in accordance with Islamic finance was introduced to the State Duma.
The Duma Committee Deputy Chairman on Financial Markets Dmitry Savelyev (LDPR faction) is the author of the initiative, reports «Izvestia». The changes are to be made to the law «On Financial Rent (Leasing)».
The main contradiction of the current financial leasing model (long-term lease of the property with a possibility of the ownership)to the Sharia is in a lease consisting of two transactions at the same time – lease and sale. The Islamic finance does not permit to combine two transactions in one.
The bill allows separating the two transactions in time. So in order to do that, it is suggested to amend the current law and add that the transfer of ownership will be covered in the lease agreement, like in the current model, or in the separate purchase and sale agreement, which then will be Shariah compliant.
Dmitry Savelyev commented that the under the current legislationit is not prohibited toconclude two agreements – lease and sale. However, the current law does not recognize these transactions as a leasing therefore the accelerated depreciation (provided by the Tax Code) will not be applicable to such products. Its application allows reducing the leased property and the income taxes.
The drafted bill also provides the possibility, by an agreement of the parties, to avoid penalties for past due payments.
Currently, the Shariah compliant lease agreements are already being concluded in Russia. «Euroasia Leasing Company» and «Amal Financial House» particularly offer such product, but the privileges mentioned above do not extend to them.
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