VAT Implications of Islamic Financing – A South African Perspective

Islamic financing is growing fast during the last years. Conventional (“Western”) taxation systems have not necessarily caught up with the numerous specific features of the Islamic finance market, creating a situation that, in many non-Islamic jurisdictions where tax laws and regulations are not adapted to Islamic forms of finance, Western and Islamic financing do not operate on a level playing field. In this article, the author explains how South Africa has amended its VAT legislation to ensure that the two types of financial transactions are treated equally for VAT purposes.