The measures were passed at end July 2010 but were published in the Bulletin Officiel des Impôts n° 78 on Aug. 24. They supersede the instructions published by the French government on Febr. 25, 2009, relating to sukuk and Murabaha transactions only.
The measures relate to the tax and other regimes for Ijara, Istisna, Murabaha and sukuk structures in France. An upbeat Christine Lagarde, minister of economy stressed that the introduction of these new instructions marks an exciting new beginning for Islamic finance in the republic.
French bankers and lawyers close to the Islamic finance industry stress that France now has a tax neutrality regime in place for facilitating Islamic financial products including Islamic bonds and certificates; cost-plus-financing; leasing and construction industry forward financing.
They further stress that the latest development is a strong statement of intent by the French authorities that the Sarkozy presidency is serious about making Paris a European hub for Islamic finance and of facilitating the introduction of Islamic finance products into France.
It has taken the French government some three years to come to this stage. Islamic finance can be a much more contentious issue in France given that its constitution is robustly secular. Arch secularists see Islamic finance as a religious encroachment on the constitution as opposed to a niche alternative form of finance based on faith ethics and in the same vein as other Islamic religious practices such as wearing the hijab or even the Nikab.
Last year the French Constitutional Court in fact ruled against an attempt to change the credit access law for small-and-medium-sized-enterprises (SMEs) so that some of them could access Islamic financial products such as Murabaha, Ijara and Istisna, all of which have equivalents in conventional finance but which differ in their contractual relationship and obligations between the provider and the user of capital and which do not involve the interest mechanism.
Nor surprisingly, this created confusion in the market and some reservations about the Sarkozy government's commitment toward facilitating Islamic finance in France under its financial inclusion policy let alone its stated ambition of making France a strong European hub for Islamic finance, investment and trade.
In reality, Islamic finance is not only aimed at French Muslims, but equally importantly to those who are interested in ethical products irrespective of religion and corporate who are interested in accessing Islamic financial products or raising funds from a another source through a Sukuk issuance for expansion, investment, working capital or balance sheet requirements.
In fact, if the French play their cards properly, they could overtake the UK as the natural hub for Islamic finance. France has a Muslim population of between 8 million to 10 million. This is four to five times the size of the Muslim population in the UK, which totalled 2 million at the last estimate. This is a decent consumer finance market size and coupled with the demands of corporates and SMEs, Islamic finance should have a vibrant niche market in France.
Another irony could be that if Islamic finance takes off in France then it could spread much faster in the Maghreb countries of the Mediterranean Basin including Algeria, Tunisia, Morocco and Libya, which are largely Francophone countries and which have been slow to involve themselves in Islamic finance in any meaningful way.
French banks such as Societe Generale, BNP Paribas, UBAF, Calyon (Banque Credit Agricole) have long been involved in global Islamic finance. BNP Paribas for instance recently listed its first Islamic exchange-traded fund (ETF) in Asia on Bursa Malaysia. Some two years ago it had advised the Malaysian Sovereign Wealth Fund, Khazanah Nasional Berhad, to launch its first Islamic ETF, MyETF i.
Similarly, Societe Generale had pioneered the Al-Sila trade funds. Both BNP Paribas and Societe Generale have long-established Islamic Banking Windows operating out of Bahrain and Dubai respectively.
The French, in the latest measures, now concede that the provisions of the Instructions issued on Feb. 25, 2009, were not adequate and had certain shortcomings in tax treatment of Sukuk and Murabaha transactions which did not give neutrality or equivalence to these structures.
The new measures are not limited to a particular transaction but form a basis for a framework for Murabaha, Istisna, Ijara and sukuk transactions which satisfy both French law and Shariah principles.
To what extent the new measures will accelerate the introduction of Islamic consumer finance products to customers in the French high street is too early to say. Already Qatar Islamic has tied up with a local French bank to distribute Islamic consumer finance products such as Ijara and Murabaha in France.
But rhetoric and ambition can easily be tested at least in the finance space by market pro-action and government encouragement and support. Two weeks ago a small little-known company in the North East of England, IIT, surprised the market by issuing the first sukuk out of the UK with a US$1 million offering. In this instance, size did not matter. It was the first mover advantage.
Source :http://www.halaljournal.com/article/5163/new-islamic-finance-instructions-in-france - Oct 14, 2010
List of Regulations : http://www11.minefi.gouv.fr/boi/boi2010/cadliste.htm and hereunder
14 octobre 2010
3 A-6-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Régime applicable aux opérations d'ijara.
3 L-1-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux opérations de murabaha.
3 L-2-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux sukuk d'investissement.
3 L-3-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Régime applicable aux opérations d'istisna.
5 C-5-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux opérations de murabaha.
5 C-6-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux sukuk d'investissement.
5 I-2-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux opérations de murabaha.
5 I-3-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux sukuk d'investissement.
7 C-1-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux opérations de murabaha.
7 C-2-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Régime applicable aux opérations d'ijara.
7 D-3-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux sukuk d'investissement.
8 M-3-10 n° 88 du 14 octobre 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux opérations de murabaha.
24 août 2010
4 FE/S1/10 n° 78 du 24 août 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux opérations de murabaha.
4 FE/S2/10 n° 78 du 24 août 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Contribution économique territoriale (CET) - Régime applicable aux sukuk d'investissement.
4 FE/S3/10 n° 78 du 24 août 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Régime applicable aux opérations d'ijara.
4 FE/S4/10 n° 78 du 24 août 2010 : Impôt sur le revenu (IR) - Impôt sur les sociétés (IS) - Taxe sur la valeur ajoutée (TVA) - Droits d'enregistrement - Régime applicable aux opérations d'istisna.
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