Atypical Silent Partnership - BaFin
Atypical Silent Partnership - BaFin
Atypical Silent Partnership - BaFin
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www.pwc.de<br />
<strong>BaFin</strong> Conference on<br />
Islamic Finance<br />
Aspects and Challenges of<br />
Taxation<br />
-Tax Treatment of a Mudarabah-<br />
10 May 2012<br />
Herbert Zerwas
1. Mudarabah Transaction<br />
Structuring of Mudarabah<br />
� Special kind of partnership<br />
� Capital is provided exclusively by the<br />
investor / bank<br />
� Businessman only provides his<br />
know-how<br />
� Comparable to a silent partnership<br />
� Agreement about profit distribution<br />
� Losses are only carried by investor /<br />
bank<br />
� Possible as: „GmbH & Still“<br />
� Businessman is single shareholder of<br />
GmbH<br />
� Bank is the silent partner<br />
Islamic Banking<br />
PwC<br />
Investor/<br />
Bank<br />
(Rabb-ul-mal)<br />
shareholder<br />
and profit and<br />
loss sharing<br />
capital know-how<br />
GmbH & Still<br />
silent<br />
partnership<br />
formation<br />
with EUR 1<br />
capital<br />
Mudarabah<br />
Businessman<br />
(Mudarib)<br />
profit sharing<br />
on limited<br />
liability<br />
company<br />
10 May 2012<br />
2
2. Mudarabah as an “<strong>Atypical</strong> <strong>Silent</strong> <strong>Partnership</strong>”<br />
� Mudarabah is from a tax point of view an atypical silent partership due to the<br />
facts that:<br />
� The bank participates in hidden reserves<br />
� The bank has (limited) controlling rights<br />
� Necessity to structure the GmbH & Still according to mudarabah rules:<br />
� The businessman (Mudarib) does not provide capital except for EUR 1<br />
which is due to formal reasons<br />
� Limited liability of bank and businessman<br />
Islamic Banking<br />
PwC<br />
10 May 2012<br />
4
3. Tax treatment of a Mudarabah Transaction<br />
3.1. Determination of Profit<br />
� Determination of profit of an atypical silent partnership is in the<br />
responsibility of the entreupeneur<br />
� The tax balance sheet of the GmbH & Still is basis of the determination of<br />
profit<br />
� The profit is determined by a unified and seperate profit assessment pursuant<br />
to sec 179 para. 1, sec 180 para. 1 no. 2a General Tax Code<br />
� The profit share of the atypical silent partner (Bank) is determined according<br />
to the defined profit distribution rules<br />
� According to Mudarabah rules the Bank must cover the loss<br />
� However, it is questionable whether such agreement is valid ?<br />
� No statement of tax authorities<br />
Islamic Banking<br />
PwC<br />
10 May 2012<br />
4
3. Tax treatment of Mudarabah<br />
3.2. Trade Tax and Income Tax<br />
� Trade Tax<br />
� Taxed on level of GmbH & Still<br />
� Subject to trade tax is the profit determined according to the tax balance<br />
sheet of the GmbH & Still<br />
� Corporation Tax<br />
� Taxed on level of Investor / Bank and GmbH<br />
� Subject to corporation tax is the profit allocated to the Investor / Bank and<br />
to the GmbH as stipulated in the silent partner agreement<br />
Islamic Banking<br />
PwC<br />
10 May 2012<br />
5
4. Example for a Mudarabah Transaction<br />
� Deposit on a Mudarabah basis<br />
• Customer (rab-ul-mal) makes a deposit in a bank<br />
• Bank acts as entrepreneur (mudarib)<br />
• Bank invests money in shari‘a-compliant products<br />
• Customer participates in profits but must carry the losses on his own<br />
Islamic Banking<br />
PwC<br />
• Problem:<br />
� Collision with deposit protection rules (EU-Law)<br />
� Customer must waive rights under deposit protection act<br />
10 May 2012<br />
6
5. Summary<br />
� Mudarabah can be structured as a silent partnership under the German law<br />
� The mudarabah profit distribution and loss participation rules require a<br />
precise wording in the articles of association<br />
� The acceptance of loss carry rules under the German tax law is questionable<br />
Islamic Banking<br />
PwC<br />
10 May 2012<br />
7
Your contact person<br />
Islamic Banking<br />
PwC<br />
PricewaterhouseCoopers AG<br />
Wirtschaftsprüfungsgesellschaft<br />
Friedrich-Ebert-Anlage 35-37<br />
60327 Frankfurt am Main<br />
herbert.zerwas@de.pwc.com<br />
Telefon +49 (0) 69 9585-6812<br />
Fax +49 (0) 69 9585-2134<br />
Herbert Zerwas<br />
Partner<br />
Financial Services Tax<br />
10 May 2012<br />
8
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