When it comes to the hot destinations for sukuk and investment funds, Luxembourg is on the pathway of becoming one of the most popular locations. Currently, the Luxembourg Stock Exchange boasts of a proud collection of sukuks and forty two Shariah-compliant funds. There are fifteen sukuks with a combined value of $5.5 billion including the first international sovereign sukuk to be issued in 2002, i.e. Malaysia Global Sukuk with a value of $600 million, the Dubai Global Sukuk, the Pakistan International Sukuk, the Qatar Global Sukuk, and the Petronas EMAS Sukuk.

Luxembourg is well-known all over the world, especially the EU and the Asian region for a wide range of asset classes and tax efficient structures. It is also quite popular for offering the UCITS in 27 European Union countries. The tax advantages pertaining to the Shariah-compliant investments include absence of wealth tax, double stamp duty, and liability to Luxemburg tax on profit or income or withholding tax for dividends.

The latest agreement signed between Saudi Arabia's Mohammed Hamad Al-Soaib Law Firm and the Luxembourg-based Lux Global Trust Services and Theisen Advocates concentrates on making investors perceive Luxembourg as a centre for Islamic finance expertise in the long-term, especially in matters relating to Shariah-compliant investment vehicles and cross-border taxation.

The deal is a strategic move towards cooperation between the firms in terms of the tax issues related to the Islamic finance products like sukuks and investment funds. This move has strengthened the relationship between the firms by laying a strong foundation of a system which keeps a check on the taxation and Islamic finance practices to serve the clients of Bahrain and KSA in a better way. This deal also aims to capitalize on the Duchy's tax regime for the international transactions and increase the use of the Duchy as a trust and tax domicile for the Saudi investment instruments and special purpose vehicles used in the issuance of financial products like sukuk, the registration of investment funds with extra stress on the Undertakings for Collective Investment Trusts of which Luxembourg is the world leader.

In the first week of April, 2010, the firms announced that they would not limit their exploration in Islamic finance and capital market products but also look forward to explore the oil, gas and petrochemical sectors maximizing their reach in the Gulf region as well as the Eastern Province. The trust and financial engineering services would be the first of their kind to be introduced in the latter region. The parties are in the process of acquiring new clients like the Islamic banks in the KSA. Various sukuks which have already been issued are SABIC (Saudi Basic Industries Corp.), SEC (Saudi Electricity Co.), Dar Al-Arkan Real Estate Development (DAAR) and Saudi Hollandi Bank.

As an icing on the cake of fifty six existing tax treaties, Luxembourg recently signed double tax treaties with the United Arab Emirates, Qatar, Kuwait and Bahrain. On Jan. 12, 2010 Luxembourg for Finance (LFF) also signed memoranda of understanding with Bahrain and the Dubai International Financial Centre to strengthen the proliferating business relationship. Also, in order to achieve symbiosis in sukuk listings and dual listings, a memorandum of understanding (MoU) was signed by the Luxembourg Stock Exchange and the national stock exchange in Malaysia in February 2010. These reports of tax saver schemes have certainly provided the investors a long term reason to cheer.

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