All questions

Common structures

Most major Egyptian banks offer a range of Islamic corporate and retail finance products, and have their own shariah boards. These banks may also offer conventional finance products in addition to Islamic products. For large-scale greenfield projects or asset acquisition financing, it is typical to have an international bank or development finance institution participate in the financing (with a shariah-compliant mandate forming a part of the finance scheme), with ijarah being the most commonly used tool. Because there is no specific regime under Egyptian law for ownership in Islamic finance transactions (since Egyptian law only recognises the transfer of title of real estate by way of official notarisation, which can be impractical in the case of Islamic financing owing to the timescales involved), Egyptian banks must proceed with an Islamic transaction as if it is a conventional one. For example, in an ijarah, whenever a bank is leasing an asset to a lessee, it is considered as the owner of said asset under the finance documentation, but the lessee will remain the registered owner and will provide a security on said asset to the bank. Egyptian companies must also adopt the Egyptian Accounting Standards for auditing purposes, even if the documentation provides for other accounting standards (e.g., those of the Accounting and Auditing Organization for Islamic Financial Institutions).

Egyptian banks with a licence from the CBE offer a range of shariah-compliant products, including murabahah, for consumer goods purchases (with purchase of cars being relatively successful) and banks have also started to offer service ijarah to finance service needs, in particular in the healthcare and education sectors.

Taxation

There is no specific treatment for Islamic financial products under Egyptian law. As long as the provider of the financing is a licensed bank, the transaction will be treated as a financing by the Egyptian tax authorities and, accordingly, the general tax provisions under Egyptian law would apply, including withholding tax, stamp duties, income taxes and VAT.