The Association of Labuan Trust Companies Malaysia (ALTCM) has persuaded the Board of the Labuan Offshore Financial Services Authority (LOFSA) to change the status of Labuan trust firms from domestic to offshore companies and is now awaiting final approval of the move from the Malaysian Finance Ministry. As at September 2001, there were only 18 active trust companies in Labuan. The companies register or incorporate offshore firms and then function as their local representatives.
It is thought that the move will help enhance the island's competitiveness, and will deliver a fillip to the island's trust industry which had been affected by the 1997 economic crisis. "It will definitely help trust companies in Labuan in the sense that we will not have so many compliances with both sides of the authority, (both from) the offshore and onshore," said chairman of ALTCM Chin Chee Kee recently.
Currently, trust companies in Labuan are incorporated under the Companies Act 1965, unlike offshore entities which are incorporated under the Offshore Companies Act 1990, and therefore pay higher taxes. "This can make our job a little bit difficult because we are servicing offshore people, but we ourselves are domestic (companies)," said Chin, who is also the executive chairman of Noblehouse International Trust Sdn Bhd.
He says that by being offshore companies, the trust firms will now be able to enjoy a more attractive tax structure, needing to pay only 3% tax of their net audited profit. "Although we are given exemption on the taxable income, effectively we are still being taxed at above 10 per cent on the audited profit," he said.
Chin said he hopes the implementation will take place as soon as possible, "preferably by the middle of next year", adding that by being an offshore entity, trust companies could now offer better benefits to their employees without much restrictions. "Previously, most of our staff will leave us and go to the (offshore) banks because they offer better benefits," he said.
Executive director of Insinger Brumby Trust (Labuan) Sdn Bhd, Raymond Wong, said changing the domicile status of trust firms to that of offshore companies is definitely a good move by the authority in spearheading further developments in Labuan's offshore industry. "Other than the obvious tax benefits, there are also other benefits which include the elimination of red-tape in general," he said.
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