Malaysia's Islamic banking gets tax boost

4 September 2006

Islamic banking looks set to receive a significant boost in Malaysia, with authorities announcing a package of tax exemptions and incentives aimed at turning Malaysia into a world leader in Islamic financial services.

The country's prime minister Datuk Seri Abdullah Ahmad Badawi announced that Islamic banks would be exempt from income tax for the next decade, a move that would allow the greater expansion of banking operations outside of Malaysia's Labuan Offshore Financial Centre.

The exemption will cover both domestic and overseas fund managers who are managing Islamic funds for foreign investors, hopefully facilitating the operation of foreign Islamic fund management activities.

In a statement quoted by Malaysia Business Times, the chief executive of Standard Chartered Bank Malaysia, Shayne Nelson, said the tax cuts would ensure that Malaysia could remain competitive on the global stage.

"Malaysia is one of the biggest financial hubs for Islamic banking and [these measures] will strengthen and accelerate the country's position to make it the leading Islamic financial centre," he said.

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