Darul Iftaa Mahmudiyyah

Selling property with fake 'interest' to gain tax relief.

· 27 Jumada I 1421 AH1 min readFatwa 463English

Question

We have negotiated a sale of a property at R1 million cash or R2 millionpayable over 12 months in equal instalments. Our accountant has advised usto structure the deal by dividing the purchase price of R2 million into capital and interest in order to gain tax relief. The sale agreement will reflect the respective amounts as capital and interest. Kindly advise if the transaction is permissible according to Shari'ah.

Answer

The sale of the property for R2 million payable over 12 months in equal instalments is permissible. To record the purchase price as interest in order to gain tax relief is permissible. The amount reflected as interest for tax relief will not be interest.

Should the purpose of structuring the deal be otherwise, for example, to obtain a loan from the bank, then it will not be permissible.

From Al Mahmood 10

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Source: Darul Iftaa Mahmudiyyah — https://askimam.org/public/question_detail/463
Fatawa SA: https://fatawa.co.za/fatwa/askimam-463

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