Bloomberg News

Thai Islamic Bank Seeks Tax Clarification Before Baht Sukuk Sale

October 05, 2011

Oct. 5 (Bloomberg) -- The Islamic Bank of Thailand is awaiting clarification from government regulators on tax breaks for Shariah-compliant bonds before proceeding with the country’s first sale of baht-denominated sukuk.

“We need to know if the tax exemptions cover both land and properties,” Dheerasak Suwannayos, president of the state-owned Islamic Bank, said in an interview today in Bangkok. “We have been told by the Securities Exchange Commission that they will get back to us in a month.”

Thailand’s only Islamic bank originally planned to sell 5 billion baht ($161 million) of sukuk, which pay returns on assets to comply with Islam’s ban on interest, in the third quarter. The cabinet approved a ruling in May that ensures stamp duties on Shariah-compliant transactions aren’t paid twice, giving equal treatment with non-Islamic investments.

The lender also plans to sell $150 million of sukuk in the Southeast Asian nation’s first global offering once the baht issue has been completed, Dheerasak said.

Islamic Bank has appointed Malaysia’s CIMB Investment Bank Bhd. as the adviser for the baht sukuk, which will have a maturity of three to five years, Dheerasak said.

“We want to issue the sukuk this year as we think borrowing costs may go up next year,” he said.

The yield on the government’s 5.25 percent non-Shariah- compliant debt due in May 2014 was little changed at 3.53 percent as of 11:34 a.m. in Bangkok, according to data compiled by Bloomberg. The rate on 5.4 percent notes maturing in July 2016 was 3.63 percent.

--Editors: Ven Ram, Simon Harvey, James Regan

To contact the reporter responsible for this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry in Hong Kong at shendry@bloomberg.net.


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