The Labuan Offshore Financial Services Authority (Lofsa) is targeting a 15%
increase in the the number of companies registered in the Labuan International
Offshore Financial Centre in the coming year, as part of an ambitious rebranding
exercise designed to increase its international visibility.
Established in 1990, Labaun is one of the youngest international offshore centres,
and although it has seen substantial growth in company registrations in recent
years in sectors such as banking and insurance and fiduciary services, it remains
relatively anonymous in comparison to the likes of the Cayman Islands, the British
Virgin Islands and the Channel Islands.
However, speaking at the Lofsa-organised 'Investment Opportunities through
Labuan IOFC' forum recently, the regulator's Director-general, Datuk Azizan
Abdul Rahman, spoke of new initiatives in 2008 to catalyze Labaun's development,
including the rebranding exercise due to begin in January.
“The re-branding exercise is undertaken in order to constantly benchmark
and re-evaluate ourselves with other offshore centres," he explained.
“Labuan needs to be more visible not only to international investors,
but also to Malaysian companies that have financial operations overseas. We
will be launching a new Labuan IOFC by end of January next year,” he added.
There are more than 6,000 companies registered in Labuan, about 900 of which
are Malaysian owned. However, over the next five years, Azizan outlined an ambitious
proposal to increase the number of entities registered in Labuan to 50,000.
The growth plans are backed by the Malaysian government, which has allocated
RM120 million (US$36 million) in the Ninth Malaysia Plan for investment in its
future development, and has already announced that improvements to Labuan's
legal regime will be put in place.
In September, Prime Minister Datuk Seri Abdullah Ahmad Badawi stated in his
2008 budget speech that in future, companies registering in the Labuan offshore
sector will 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.
"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," the Prime Minister explained at the time.
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.
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.
Among other projects to help attract international investors, improvements will also be made to Labuan's telecommunications infrastructure, and there will be consultations
with international experts to increase the profile of the Labuan International
Financial Exchange (LFX), where 44 companies are currently listed.
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