Korea And Malaysia Discuss Labuan's Exclusion From DTAA
The chief administrators of the Korean National Tax Service (NTS) and the Malaysian
Inland Revenue Board (IRB) held a meeting in Kuala Lumpur last week, where the
subject of Labuan's involvement in the recent tax violations by foreign fund
companies operating in South Korea was discussed. According to a report by the Korean Overseas Information Service (KOIS), Lee
Ju-sung, head of the NTS, expressed concern to Zainol Abidin Rashid, chief executive
of the IRB, about "Malaysia's tax haven of Labuan in connection with the
NTS's investigation into foreign funds". The report went on to state that the two tax administrators "exchanged
views fully on excluding Labuan from the proposed revision of the bilateral
tax treaty." The Korean tax authorities believe that many of the firms which are accused
of avoiding tax on capital gains are doing so through offices registered in
Labuan. In September, six foreign fund firms were landed with a total back tax bill
of more than US$200 million by the Korean National Tax Service after an investigation
which began earlier in the year. According to the NTS, the funds evaded taxes by nominally basing themselves
offshore, paying high rates of interest to their overseas affiliates, using
illegal expenses and failing to report securities transactions in accordance
with the law. Seoul is attempting to tighten up several of its double taxation agreements
with other countries, and is drafting new laws to tighten tax rules governing
the activities of foreign funds. .
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