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Labuan IBFC Reports Strong 2014 Performance

by Mary Swire,, Hong Kong

03 June 2015

Company registrations in the low-tax jurisdiction of Labuan grew last year, with the special economic zone located off the north coast of Malaysia continuing to benefit from economic growth in the Asia-Pacific region.

The Labuan Financial Services Authority's Annual Report for 2014 revealed 12.3 percent growth in new company registrations in 2014 compared with the previous year. More than two-thirds (70 percent) of these new companies originated from Asia.

LFSA Chairman Zeti Akhtar Aziz explained in the report that Labuan has benefited from being centrally located in the fast-growing Asia-Pacific region and is "strategically well positioned to tap into the growing wealth creation with the ASEAN region."

"Additionally, the unique business propositions offered by the Labuan International Business and Financial Centre have continued to attract multinational corporations from across the globe to its shores," she added.

Under the Labuan Offshore Business Activity Tax Act 1990 (as amended in 2004), chargeable profits derived by an offshore company from an offshore trading activity are subject to tax at a rate of three percent. Alternatively, an offshore company that carries on an offshore trading activity may, within three months from the commencement of any calendar year, elect to be subject to tax instead of MYR20,000 (USD5,400) for that year of assessment. An offshore company that carries on an offshore non-trading activity is exempt from income tax altogether.

The report said that there had been growth across all financial sectors in Labuan in 2014 including banking, insurance, leasing, wealth management, and Islamic finance.

There was also a 70 percent increase in the number of Labuan oil trading companies participating in the Global Incentive For Trading (GIFT) program from 23 to 39. The key incentives offered for an Labuan International Trading Company (LITC) under the GIFT program include a flat corporate tax rate of 3 percent of chargeable income, a 100 percent exemption on directors fees paid to non-Malaysian directors, and a 50 percent exemption on gross employment income for non-Malaysian professional traders and managers of LITC companies. There is also an exemption from stamp duties on documentation for such business activities, a tax exemption on dividends received by or paid from LITC companies, and all of the other fiscal incentives that are attached to operating a Labuan entity.

The Labuan IBFC is now home to 11,630 companies, 57 international banks, 209 insurance companies, 359 leasing companies, 130 foundations, and nine fund management companies.

TAGS: Offshore | tax | business | banking | insurance | offshore | Malaysia | dividends | Labuan | Asia-Pacific | Tax

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