The Labuan International Business and Financial Centre Inc (IBFC), the offshore
jurisdiction's marketing and promotion arm, has announced the launch of a promotional
drive to attract more business from Asia and the Middle East to the low tax
finance centre, which lies off the coast of Malaysia.
Announcing the initiative at a recent press conference, Martin Crawford, the
chief executive officer of the Labuan IBFC, revealed that offices would be set
up in Hong Kong and either Abu Dhabi or Dubai within the next twelve months.
But firstly, the IBFC would attempt to spread Labuan's message through roadshows
in India, North Asia, Australia and Indonesia, he disclosed.
Crawford explained that the IBFC was keen to tap into newer emerging markets
for offshore investment flows such as India, China and the Gulf Cooperation
Council (GCC) region, which have traditionally routed their offshore investments
through Mauritius or Singapore.
According to Crawford, the marketing campaign would focus on attracting business
in five key areas, including international holding companies, private and public
investment banks, captive insurance, Islamic finance and wealth management products.
Labuan is a relatively unknown offshore jurisdiction, having been created by
the Malaysian government in 1990. However, it offers a highly attractive tax
regime to offshore companies, and the IBFC will no doubt emphasise this point
in its campaign
The Labuan Offshore Business Activity Tax Act 1990 (as amended 2004) provides
for the reduction or complete exemption of income tax in respect of certain
business activities carried on by offshore companies in Labuan. Chargeable profits
derived by an offshore company from an offshore trading activity are subject
to tax at a rate of 3%. An offshore company which carries on an offshore non-trading
activity is exempt from income tax altogether.
Last year, Prime Minister, Datuk Seri Abdullah Ahmad Badawi stated in his budget
speech that in future, companies registering in the Labuan offshore sector would
have the option of having their offshore business income taxed under the Income
Tax Act 1967, in addition to under the Labuan Offshore Business Activity Tax
Act 1990. The Income Tax Act 1967 applies to any activity other than offshore
business activity carried on by an offshore company, meaning that they pay normal
taxes.
The Prime Minister explained at the time that:"In the light of greater
global competition, we need to ensure that Labuan remains competitive as an
international offshore financial centre. Given that investors in Labuan undertake
a wide range of financial services, a flexible tax regime is necessary."
Despite is hitherto low profile however, growth in the Labuan offshore sector
has been strong. As of March this year, there were more than 6,500 companies
operating in Labuan, including 58 offshore banks with total assets of USD26.6
billion, 132 offshore insurers with more than USD600 million in capitalisation,
106 leasing companies with USD16 billion in leases and 22 fund management and
46 listed instruments worth USD16.1 billion.
By the year 2012, the Labuan Offshore Financial Services Authority (Lofsa)
is aiming to have 50,000 companies registered in the financial centre.
“Labuan is an unpolished gem that can be sold to the world," Crawford
observed.
"I am sure it has the potential to be a leading business and financial
centre in the region once we have polished it," he added.
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