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Labuan IBFC: Tropical Paradise in the South China Sea.

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Presentation on theme: "Labuan IBFC: Tropical Paradise in the South China Sea."— Presentation transcript:

1 Labuan IBFC: Tropical Paradise in the South China Sea

2 WHERE IS LABUAN?

3 WHO ARE WE? EC Trust (Labuan) Bhd Incorporated under Labuan Companies Act, 1990 on 3 rd March 2003 Licensed Trust Company under Labuan Financial Services and Securities Act 2010 Providing professional services: 1.Incorporation services and formation of Labuan entities 2. In-house customised support services – a) Corporate secretarial services b) Trusts, holding of shares on trust c) Bank account d) Legal advice e) Accounting f) Custodial services 2

4 WHO ARE WE? PETER SEARLE B.A. LLB (Hons), LLM Managing Director Qualifications: Honours degree in Law, including International Law - Australian National University, 1979 Admitted as a Solicitor and Barrister - Supreme Court of Victoria in 1982 completed a Masters of Law in Taxation at Monash University in 1985 Tax and trust law specialist for over 33 years: Australian Taxation Office Canberra Senior Taxation Manager, Coopers and Lybrand Australian barrister Managing Director and Trust Officer, EC Trust (Labuan) 3

5 WHO ARE WE? MARINA MALIM BLS (Hons) Director Qualifications: Degree of Legal Studies (Hons) - University Teknologi MARA (UiTM) Pursuing her Institute of Chartered Secretaries and Administrator (ICSA) certificate from MAICSA Experience: present. Director and Trust Officer of EC Trust (Labuan) Bhd Specialising in legal and compliance issues, Labuan company formation and incorporation, licensing, tax planning and secretarial matters under the Labuan laws 4

6 WHY CHOOSE LABUAN IBFC?

7 LEGAL FRAMEWORK Modern company concepts English common law tradition with modern legislation Make offers or invitations to 50 persons (without Authoritys approval) Restructure or reduce capital (without court approval) Purchase or finance acquisition of own shares Carry on business with residents Operate private fund (by notification) Dissolve without court approval and appointment of liquidator Company record not open to public inspection Issue no par value shares or fractions of shares Stability, certainty, reliability and protection

8 Labuan Entities LEGAL FRAMEWORK

9 Labuan is part of Malaysia and therefore, qualifies for double taxation relief where Malaysia is contracting party to a specific DTA. Companies that wish to invest in countries where a DTA does not exist between both countries, can establish a Labuan intermediary company with the benefit of Malaysian treaties. Malaysia has 70 DTAs. DOUBLE TAX AGREEMENTS

10 10 MALAYSIA : 70 DOUBLE TAX AGREEMENTS

11 Labuan company is regarded as non-resident for exchange control purposes. Labuan company is generally not subject to any exchange control requirements. EXCHANGE CONTROL

12 TAX BENEFITS Labuan Company Other Activities Labuan Business Activity Trading Non-Trading Income Tax Act 1967 LBATA % or MYR20,000 LBATA % or MYR20,000 Not taxable 12

13 Labuan trading activity includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity (Section 2 of Labuan Business Activity Tax Act 1990) ________________________________________________________ Tax charged at the rate of 3% based on the net profits reflected in the audited accounts. or upon election i.e. Labuan Company may choose to pay a fixed sum of MYR 20,000. LABUAN TRADING ACTIVITIES

14 Labuan non-trading activity means an activity relating to the holding of investments in securities, stock, shares, loans, deposits or any other properties by a Labuan entity on its own behalf; ________________________________________________________ Gains from Labuan non-trading activities which include receipt of dividends, sale of investments and interest income from Labuan non-trading activities are not subject to tax in Malaysia. LABUAN NON-TRADING ACTIVITIES

15 The chargeable profits of Labuan entity carrying on Labuan trading activity will be taken from net profits as reflected in the audited accounts. No audited accounts need to be submitted with tax return if elect to pay MYR 20,000. TAX REQUIREMENTS

16 TAX BENEFITS Other Tax Benefits 16 No witholding taxes Personal tax exemption No indirect taxes Exempt from stamp duty Tax free dividends

17 No Indirect Taxes No indirect taxes such as sales taxes, service taxes, excise / import duties and export duties levied on Labuan companies since Labuan enjoys free port status TAX BENEFITS

18 No Withholding Taxes Royalties, interest and technical or management fees paid by Labuan company to non – resident person or Labuan Company are exempted from income tax and thus not subjected to withholding tax (WHT). TAX BENEFITS

19 Exempt from Stamp Duty Labuan companies qualify for stamp duty exemption on: Instruments executed by Labuan company in connection with Labuan business activity. Memorandum & Articles of Association of Labuan company. Instruments of transfer of shares in a Labuan company. TAX BENEFITS

20 Personal Tax Exemption for Expatriates of Labuan Company 100% exemption on director fees received by a non-citizen director 50% tax exemption on gross employment income of a non Malaysian Resident working in a managerial capacity in a Labuan financial institution TAX BENEFITS

21 Tax Rebate for Malaysians 50% tax exemption on Labuan allowances and housing allowances of Malaysian citizens working in a Labuan financial institution TAX BENEFITS

22 WHY CHOOSE LABUAN ENTITIES?

23 Tax Planning Opportunities outbound investment / international trading international investment leasing activities holding Investment Company WHY CHOOSE LABUAN ENTITIES A hub for

24 A Hub for Investments and International Trading Malaysian Co. Labuan Co. (LC) China Thailand Singapore India 24 WHY CHOOSE LABUAN ENTITIES

25 A Hub for International Trading and Investments Dividend income from the Labuan Company –Dividend income received from the Labuan Company is tax exempt in Malaysia and world-wide under the participation exemption. –Dividend income received is available for an exempt distribution in Malaysia WHY CHOOSE LABUAN ENTITIES

26 A Hub for Investments and International Trading Dividend income received is available for exemption as follows: Shareholders Labuan Co. Malaysian Co. Exempt dividend 26 WHY CHOOSE LABUAN ENTITIES

27 A Hub for International Investment Labuan entities may be used to penetrate into Asian market Foreign Co. Labuan Co. (LC) Thailand Singapore Vietnam Cambodia 27 WHY CHOOSE LABUAN ENTITIES

28 A Hub for Leasing Activities Leasing business means: Business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer regardless whether the letting is with or without an option to purchase the property, including charters of ships, property includes any plant, machinery, equipment or other chattel attached or to be attached to the earth charters of ships means bareboat charters only and does not include the transportation of passengers or cargo by sea or the charter of ships on a voyage or time charter WHY CHOOSE LABUAN ENTITIES

29 Flow Chart WHY CHOOSE LABUAN ENTITIES

30 An annual license fee of MYR 40,000 is payable plus MYR 20,000 for each subsequent transaction conducted with Malaysian residents. Labuan leasing companies providing lease facilities to non- residents or conducting out-out transactions are not required to pay annual fees or the subsequent transaction fees WHY CHOOSE LABUAN ENTITIES?

31 Patent, Royalty and Copyright Holding Intellectual property including –computer software, –technical knowledge, –patents, –trademarks and –copyrights, can be owned by, or assigned to, a Labuan company. The rights can be franchised to companies around the world and the resultant income may be accumulated in Labuan or distributed by the Labuan company free of withholding tax and received tax free under the participation exemption WHY CHOOSE LABUAN ENTITIES?

32 Labuan IBFC: New Regulatory Updates 32

33 New Legislation Labuan Companies Act 1990 Labuan Business Activity Tax Act 1990 Labuan Financial Services Authority Act 1996 Labuan Trusts Act 1996 Labuan Financial Services and Securities Act 2010 Labuan Islamic Financial Services and Securities Act 2010 Labuan Foundations Act 2010 Labuan Limited Partnerships And Limited Liability Partnership Act

34 Labuan Companies Act

35 Modern company concepts Restructure or reduce capital (without court approval) Purchase or finance acquisition of own shares Carry on business with residents Dissolve without court approval and appointment of liquidator Company record not open to public inspection Issue no par value shares or fractions of shares Labuan Companies Act

36 Labuan Business Activity Act

37 Labuan Business Activity Act 1990 Allowed Shipping Operations in Malaysia Labuan trading activity includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non- trading activity Shipping operations means the transportation of passengers or cargo by sea or the letting out on a charter of ships on a voyage or time charter basis – Section

38 Labuan Business Activity Act 1990 Labuan entities elect under Income Tax Act 1967 to re-engage DTA benefits DTA Benefits Benefits in source country 1. Business profits exempt 2. Lower withholding tax rates

39 Labuan Business Activity Act 1990 Information sharing Malaysian Government will not permit fishing expeditions. No automatic information sharing. Prima facie case must be made out by the Government making the request

40 Labuan Business Activity Act 1990 Advance Ruling Section 17B Advance Ruling enables Labuan entities to seek a ruling of the Director General of IRB on the application of LBATA to Labuan entities. 40

41 Labuan Financial Services And Securities Act

42 Labuan Financial Services and Securities Act Securities lawsLabuan Insurance Exchanges (LFX) Labuan Trust Company Labuan Banking 42

43 Labuan Financial Services and Securities Act 2010 Key Features 1. Make invitations to 50 persons without the Authoritys approval 2. Operate private funds without prior approval from any Authority 3. Operate in a strictly confidential and private business environment which is entrenched by Malaysian Statutes supported by fiercely independent government in Malaysias post-colonial era

44 Labuan Financial Services and Securities Act Key Features 4. Licensed insurance brokers being financial planners - The new definition of insurance broker has been extended to expressly include a person who is licensed to analyse the financial circumstances of another person and provides a plan to meet that other persons financial needs and objectives… 44

45 Labuan Foundations Act

46 Labuan Foundations (LF) Labuan Foundations Act 2010 Capacity of LF Founder of LF Beneficiaries Purpose and Objective Management S.50 LF is a body corporate and may sue and be sued in its corporate name S.5(1) A resident or a non - resident S.6(1) A resident or a non - resident S.7(1) The main purpose of LF shall be the management of its property. Founder act as an officer of LF Property of LF cannot include Malaysian property except with prior approval from authority or LF is charitable Income derived from Malaysian property falls under ITA 1967 Income derived from non - Malaysian property falls under LBATA S.7(2) LF may also include other lawful objects Provide for the appointment of a council to manage LF. 46

47 Labuan Foundations (LF) Labuan Foundations Act 2010 Confidentiality:- No information or documents concerning LF may be divulged to a third party unless with court order Benefits Asset protection:- LF grants asset protection unless the assets are fraudulently disposed to LF. Unenforceability of a foreign claim Distribution of assets :- Permissible to beneficiary unless the distribution is to defeat the creditor claim. Rights to information :- Rights of beneficiaries to request for information concerning the property of LF

48 Labuan Foundations Act 2010 Foundation is a legal entity. Liability of foundation is limited to the value of its net assets. Allows redomicilation of foundation into or out of Labuan. Where LF is dissolved and there remains some property after its dissolution, those properties shall be the property of the beneficiary(ies). A foundation can be deemed Islamic if it subscribes to Shariah principles and appoints a Shariah advisor

49 Labuan Trust Act

50 Labuan Trust Act 1996 Labuan Special Trust Allow trust to hold shares in Labuan Holding Company, which in turn may hold assets such as cash, real estate, art, securities, businesses, insurance policies etc Retention of day-to-day control over the direction and management of investments and businesses can be held by a settlor or protector and the trustee is not liable for losses. Default provision : exist perpetuity Flexibility for a fixed- term trust to be converted to perpetual or vise versa Purpose trust, charitable trust, promotion of religion, advancement of human rights and fundamental freedom

51 What are you waiting for? Come to Labuan or visit our website at and join the ranks of successful companies and individuals gaining the benefits of Labuan, Malaysia. WHAT ARE YOU WAITING FOR?

52 EC Trust (Labuan) Bhd. Wisma EC Trust U0195 Jalan Merdeka Labuan F.T Malaysia Tel : Fax: Web: Thank you 52


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