Selling property with fake 'interest' to gain tax relief.
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
Fatawa SA is an independent, read-only index of fatawa already published by Darul Iftaa Mahmudiyyah (AskImam). It is not a fatwa service. For your own situation, ask the issuing Darul Ifta directly.