Statement of Practice: application of Article 123D(4)(e) to a Shariah compliant funding structure[i]
The provisions of Article 123D(4)(e) will not be in scope in the context of a Shariah compliant funding structure materially in the form illustrated (by reference to the diagram and notes).
Notes on structure:
- The structure is specific to a Tawwarruq/Murabaha arrangement.
- Funding company is used to support one specific investment structure
- Funding company purchases commodities at cost
- Intermediate holding company purchases those commodities from Funding company on deferred payment terms for a price equivalent to Cost plus Profit
- The commodities are immediately sold back to the market
- The proceeds from the sale of the commodities are used by Intermediate holding company for its specified purpose
- The inclusion of additional intermediate holding companies under the trust in the above structure diagram will not prejudice the application of this Statement of Practice
- The purchase of an investment asset other than a real estate asset will not prejudice the application of this Statement of Practice
- The inclusion of arrangements for the transfer of shares in the Intermediate holding company, or other property, between the Jersey Trust and the Funding company will not prejudice the application of this Statement of Practice.
This Statement of Practice clarifies that equality of
treatment exists between the specific Shariah compliant funding structure
outlined above and the treatment of a conventional counterpart.
[i] Revenue Jersey recognises that there are other Shariah compliant structures not covered by this Statement of Practice. These will be reviewed, as they are brought to our attention, with the intention of adding to this practice note in due course.