Bonus

[amarriedmess]

Salam Aalaykom
I live in a European country which is considered among the top in the world regarding income tax. I am offered a bonus this year based on my performance and got to choose between 3 options.
100% cash: around 67% will go to tax
100% short term warrant(can sell them same day I receive them): around 54% tax
100% long term option (can only sell them after 1 year): around 33% tax.

As you can see all of them are taxed, but the cash one results in nuts. I am also eligible to have a split 50-50% between any 2 options.
The underlying asset is a 50 stocks index. The warrants are 10 years long and i can sell them or exercise them. For option 2, i will be selling the warrant to the bank issued by them so company buys it from bank x and i sell it back to them.
I know warrants aren’t halal but also paying too much tax is draining. I pay 42% of my salary in tax each month.

Your thoughts?
Thanks

 

[annache]

@amarriedmess

I know warrants aren’t halal

I think this is just the opinion of some scholars who extrapolate from the hadith "do not sell what you do not own" . Obviously there was no such thing as warrants at the time of the prophet. But in the warrant you own the right to purchase stock from the company. Its a standard method of executive compensation.

It depends if you really want to follow these opinions (from people who dont accept modern finance, or dont know much about it). Warrants are a pretty universally recgnized instrument across most financial jurisdictions.

 

[princesst1]

@annache Standard does not make it halaal. It is standard to consume alcohol in many countries thus by your logic its halaal.

The issue is not as simple as you claim.

 

[annache]

@princesst1 There is no Quranic statement about warrants or derivatives in general, while there is a prohibition on wine.

There is a clear benefit to tying compensation to the performance of the company you are working for.

 

[princesst1]

@annache So what? Fiqh is not decided on Qur'aan alone. Shari'ah is based on principles derived from Qur'aan AND Sunnah.

 

[annache]

@princesst1 When you drill down into the basis of sharia and finance, there is not much there. In fact, bai salam went on, a type of forward sale with delayed delivery. Islamic schools argue about Arbun, a type of paid option. What you get is the opinions of scholars, based on the irrelevant uncertainties of "the catch of a diver" or the gambling of the pebble game. So some derivatives are ok.

Islamic scholars seem to make the mistake of equating the motive with the instrument. You can use derivatives to reduce gharar or to increase it, or to speculate. Using their logic in prohibiting derivatives (a warrant is a derivative) a coin is haram because you can gamble with it (flip heads or tails).

Think about the context - there were no options clearing corporations or futures settlement. You might just be depending on the promise of a merchant or moneylender. So it made sense to discourage these types of transactions at the time of the prophet.

So, warrants are an option to buy the stock of your company which may or may not be worth much, depending on the performance of the company. There is no reason to prohibit it.

 

[cautiouslittlehope]

@amarriedmess Is the underlying asset EURO STOXX 50 Index?