Presentation on theme: "Labuan IBFC: Tropical Paradise in the South China Sea"— Presentation transcript:
1 Labuan IBFC: Tropical Paradise in the South China Sea 1
2 WHERE IS LABUAN? 1 www.ectrustco.com 6087 453 858 2
3 WHO ARE WE? 2 EC Trust (Labuan) Bhd Providing professional services: Incorporated under Labuan Companies Act, 1990 on 3rd March 2003Licensed Trust Company under Labuan Financial Services and Securities Act 2010Providing professional services:Incorporation services and formation of Labuan entities2. In-house customised support services –Corporate secretarial servicesTrusts, holding of shares on trustBank accountLegal adviceAccountingCustodial services
4 WHO ARE WE? 3 PETER SEARLE B.A. LLB (Hons), LLM Managing Director Qualifications:Honours degree in Law, including International Law - AustralianNational University, 1979Admitted as a Solicitor and Barrister - Supreme Court of Victoria in1982completed a Masters of Law in Taxation at Monash University in1985 Tax and trust law specialist for over 33 years:Australian Taxation Office CanberraSenior Taxation Manager, Coopers and LybrandAustralian barristerManaging Director and Trust Officer, EC Trust (Labuan)
5 WHO ARE WE? 4 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 MAICSAExperience:2009- present. Director and Trust Officer of EC Trust (Labuan) BhdSpecialising in legal and compliance issues, Labuan company formation andincorporation, licensing, tax planning and secretarial matters under the Labuan laws
7 Stability, certainty, reliability and protection 7LEGAL FRAMEWORKIssue no par value shares or fractions of sharesEnglish common law tradition with modern legislationMake offers or invitations to 50 persons (without Authority’s approval)Restructure or reduce capital (without court approval)Modern company conceptsPurchase or finance acquisition of own sharesCarry on business with residentsOperate private fund (by notification)Dissolve without court approval and appointment of liquidatorCompany record not open to public inspectionStability, certainty, reliability and protection
9 9DOUBLE TAX AGREEMENTSLabuan 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.
11 11EXCHANGE CONTROLLabuan company is regarded as non-resident for exchange control purposes.Labuan company is generally not subject to any exchange control requirements.
12 Labuan Business Activity 12TAX BENEFITSIncome Tax Act 1967Other ActivitiesLabuan CompanyLabuan Business ActivityLBATA 19903% or MYR20,000TradingNon-TradingNot taxable
13 (Section 2 of Labuan Business Activity Tax Act 1990) 13LABUAN TRADING ACTIVITIES“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.orupon election i.e. Labuan Company may choose to pay a fixed sum of MYR 20,000.
14 14LABUAN NON-TRADING ACTIVITIES“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 taxin Malaysia.
15 15TAX REQUIREMENTSThe 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.
16 Personal tax exemption 16TAX BENEFITSNo indirect taxesNo witholding taxesTax free dividendsOther Tax BenefitsExempt from stamp dutyPersonal tax exemption
17 service taxes, excise / import duties 17TAX BENEFITSNo Indirect TaxesNo indirect taxes such as sales taxes,service taxes, excise / import dutiesand export dutieslevied on Labuan companiessince Labuan enjoys free port status
18 No Withholding Taxes TAX BENEFITS 18TAX BENEFITSNo Withholding TaxesRoyalties, 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”).
19 Exempt from Stamp Duty TAX BENEFITS 19 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.
20 TAX BENEFITS 100% exemption on director fees 20TAX BENEFITSPersonal Tax Exemptionfor Expatriates of Labuan Company100% exemption on director feesreceived by a non-citizen director50% tax exemption on gross employment incomeof a non Malaysian Resident working in amanagerial capacity in a Labuan financial institution
21 on Labuan allowances and housing allowances 21TAX BENEFITSTax Rebatefor Malaysians50% tax exemptionon Labuan allowances and housing allowancesof Malaysian citizens working in aLabuan financial institution
23 Tax Planning Opportunities holding Investment Company 23WHY CHOOSE LABUAN ENTITIESTax Planning Opportunitiesoutbound investment / international tradinginternational investmentleasing activitiesholding Investment CompanyA hub for
24 A Hub for Investments and International Trading 24WHY CHOOSE LABUAN ENTITIESA Hub for Investments and International TradingSingaporeMalaysian Co.Labuan Co. (LC)IndiaChinaThailand
25 A Hub for International Trading and Investments 25WHY CHOOSE LABUAN ENTITIESA Hub for International Trading and InvestmentsDividend income from the Labuan CompanyDividend 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.
26 Dividend income received is available for exemption as follows:- 26WHY CHOOSE LABUAN ENTITIESA Hub for Investments and International TradingDividend income received is available for exemption as follows:-Labuan Co.Exempt dividendMalaysian Co.Exempt dividendShareholders
27 WHY CHOOSE LABUAN ENTITIES 27WHY CHOOSE LABUAN ENTITIESA Hub for International InvestmentLabuan entities may be used to penetrate intoAsian marketSingaporeThailandForeign Co.Labuan Co. (LC)VietnamCambodia
28 A Hub for Leasing Activities 28WHY CHOOSE LABUAN ENTITIESA Hub for Leasing ActivitiesLeasing 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
30 An annual license fee of MYR 40,000 is payable 30WHY CHOOSE LABUAN ENTITIES?An annual license fee of MYR 40,000 is payableplus 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.
31 Patent, Royalty and Copyright Holding 31WHY CHOOSE LABUAN ENTITIES?Patent, Royalty and Copyright HoldingIntellectual property includingcomputer software,technical knowledge,patents,trademarks andcopyrights,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.
32 Labuan IBFC: New Regulatory Updates 32Labuan IBFC: New Regulatory Updates32
33 New Legislation 33 Labuan Companies Act 1990 Labuan Financial Services Authority Act 1996Labuan Financial Services and Securities Act 2010Labuan Foundations Act 2010Labuan Business Activity Tax Act1990Labuan Trusts Act1996Labuan Islamic Financial Services and Securities Act 2010Labuan Limited Partnerships And Limited Liability Partnership Act2010
35 35Labuan Companies Act 1990Issue no par value shares or fractions of sharesRestructure or reduce capital (without court approval)Modern company conceptsPurchase or finance acquisition of own sharesCarry on business with residentsDissolve without court approval and appointment of liquidatorCompany record not open to public inspection
36 Labuan Business Activity Act 1990 36Labuan BusinessActivityAct 1990
37 Labuan Business Activity Act 1990 37Labuan Business Activity Act 1990Shipping 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 activityAllowed“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 2
38 DTA Benefits Labuan Business Activity Act 1990 38Labuan Business Activity Act 1990Labuan entities elect underIncome Tax Act 1967 to re-engage DTA benefitsDTA BenefitsBenefits in source country1. Business profits exempt2. Lower withholding tax rates
39 Labuan Business Activity Act 1990 39Labuan Business Activity Act 1990Information sharingMalaysian 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 40Labuan Business Activity Act 1990Advance RulingAdvance Ruling enables Labuan entities to seek a ruling of the Director General of IRB on the application of LBATA to Labuan entities.Section 17B
43 Key Features Labuan Financial Services and Securities Act 2010 43 1. Make invitations to 50 persons without the Authority’s approval 2. Operate private funds without prior approval from any Authority3. Operate in a strictly confidential and private business environment which is entrenched by Malaysian Statutes supported by fiercely independent government in Malaysia’s post-colonial era
44 Key Features Labuan Financial Services and Securities Act 2010 44 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 person’s financial needs and objectives…”
46 Labuan Foundations Act 2010 46 Labuan Foundations (LF) Capacity of LF BeneficiariesManagementFounder of LFPurpose and ObjectiveS.50LF is a body corporate and may sue and be sued in its corporate nameFounder act as an officer of LFS.6(1)A resident or a non - residentS.7(1)The main purpose of LF shall be the management of its property.S.5(1)A resident or a non - residentProvide for the appointment of a council to manage LF.Income derived from Malaysian property falls under ITA 1967Property of LF cannot include Malaysian property except with prior approval from authority or LF is charitableS.7(2)LF may also include other lawful objectsIncome derived from non -Malaysian property falls under LBATA
47 Labuan Foundations Act 2010 47 Labuan Foundations (LF) BenefitsRights to information :-Rights of beneficiaries to request for information concerning the property of LFConfidentiality:-No information or documents concerning LF may be divulged to a third party unless with court orderAsset protection:-LF grants asset protection unless the assets are fraudulently disposed to LF.Distribution of assets :-Permissible to beneficiary unless the distribution is to defeat the creditor claim.Unenforceability of a foreign claim
48 Labuan Foundations Act 2010 48 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.
50 50Labuan TrustAct 1996Default provision :exist perpetuityPurpose trust, charitable trust, promotion of religion, advancement of human rights and fundamental freedomFlexibility for a fixed-term trust to be converted to perpetual or vise versaLabuan Special TrustAllow trust to hold shares in Labuan Holding Company, which in turn may hold assets such as cash, real estate, art, securities, businesses, insurance policies etcRetention 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.
51 WHAT ARE YOU WAITING FOR? 51WHAT ARE YOU WAITING FOR?What are you waiting for?Come to Labuan or visit our website at and join the ranks ofsuccessful companies and individualsgaining the benefits of Labuan, Malaysia.
52 Thank you 52 Tel : +60 87 453 858 EC Trust (Labuan) Bhd. Wisma EC TrustU0195 Jalan Merdeka87007 Labuan F.TMalaysiaTel :Fax:Web:Thank you