labuan ibfc: tropical paradise in the south china sea

Labuan IBFC:

Tropical Paradise in the South China Sea

WHERE IS LABUAN?WHERE IS LABUAN?1

6087 453 858 [email protected] www.ectrustco.com

WHO ARE WE?WHO ARE WE?


EC Trust (Labuan) Bhd Incorporated under Labuan Companies Act, 1990 on 3rd March 2003

Licensed Trust Company under Labuan Financial Services and Securities Act 2010

Providing professional services:1.Incorporation services and formation of Labuan entities

2. In-house customised support services –

a) Corporate secretarial services

b) Trusts, holding of shares on trust

c) Bank account

d) Legal advice

e) Accounting

f) Custodial services

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PETER SEARLE B.A. LLB (Hons), LLMManaging DirectorQualifications:• Honours degree in Law, including International Law - Australian National University, 1979 • Admitted as a Solicitor and Barrister - Supreme Court of Victoria in 1982•completed a Masters of Law in Taxation at Monash University in 1985

Tax and trust law specialist for over 33 years:

1977 - 1980 Australian Taxation Office Canberra

1982 - 1985 Senior Taxation Manager, Coopers and Lybrand

1986 - 2002 Australian barrister

2002 - Managing Director and Trust Officer, EC Trust (Labuan)

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MARINA MALIM BLS (Hons)Director

Qualifications:• Degree of Legal Studies (Hons) - University Teknologi MARA (UiTM) • Pursuing her Institute of Chartered Secretaries and Administrator (ICSA) certificate from MAICSA

Experience:

• 2009- present. Director and Trust Officer of EC Trust (Labuan) Bhd

• Specialising in legal and compliance issues, Labuan company formation and

incorporation, licensing, tax planning and secretarial matters under the Labuan laws

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WHY CHOOSE

LABUAN IBFC?

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LEGAL FRAMEWORK LEGAL FRAMEWORK


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Modern company concepts

English common law tradition with

modern legislation

Make offers or invitations to 50 persons (without Authority’s approval)Restructure or reduce capital (without court

approval)

Purchase or finance acquisition of own shares

Carry on business with residents

Operate private fund (by notification)

Dissolve without court approval and appointment of liquidator

Company record not open to public inspection

Issue no par value shares or fractions of shares

Stability, certainty, reliability and protection

Labuan Entities

LEGAL FRAMEWORK LEGAL FRAMEWORK


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• Labuan is part of Malaysia and therefore, qualifies for double taxation relief where Malaysia is contracting party to a specific DTA.

• Companies that wish to invest in countries where a DTA does not exist between both countries, can establish a Labuan intermediary company with the benefit of Malaysian treaties.

• Malaysia has 70 DTAs.

DOUBLE TAX AGREEMENTS DOUBLE TAX AGREEMENTS


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10 MALAYSIA : 70 DOUBLE TAX AGREEMENTS

Labuan company is regarded as non-resident for exchange control purposes.

Labuan company is generally not subject to any exchange control requirements.

EXCHANGE CONTROL EXCHANGE CONTROL


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TAX BENEFITSTAX BENEFITS


Labuan Company

Labuan Company

Other ActivitiesOther Activities

Labuan Business Activity

Labuan Business Activity

TradingTrading

Non-TradingNon-Trading

Income Tax Act 1967

Income Tax Act 1967

LBATA 19903% or

MYR20,000

LBATA 19903% or

MYR20,000

Not taxableNot taxable

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“Labuan trading activity” includes banking, insurance, trading, management, licensing, shipping operations or

any other activity which is not a Labuan non-trading activity

(Section 2 of Labuan Business Activity Tax Act 1990)

________________________________________________________

Tax charged at the rate of 3% based on the net profits reflected in the audited accounts.

or upon election i.e. Labuan Company may choose to pay a fixed sum of

MYR 20,000.

LABUAN TRADING ACTIVITIES LABUAN TRADING ACTIVITIES


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“Labuan non-trading activity” means an activity relating to the holding of investments in securities, stock,

shares, loans, deposits or any other properties by a Labuan entity on its own behalf;

________________________________________________________

Gains from Labuan non-trading activities which include receipt of dividends, sale of investments and interest income from Labuan

non-trading activities are not subject to tax

in Malaysia.

LABUAN NON-TRADING ACTIVITIES LABUAN NON-TRADING ACTIVITIES


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The chargeable profits of Labuan entity carrying on

Labuan trading activity will be taken from net profits as reflected in the audited accounts.

No audited accounts need to be submitted with tax return if elect to pay MYR 20,000.

TAX REQUIREMENTS TAX REQUIREMENTS


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TAX BENEFITSTAX BENEFITS


Other Tax Benefits

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No witholding

taxes

Personal tax

exemption

No indirect taxes

Exempt from stamp

duty

Tax free dividends

No Indirect Taxes

No indirect taxes such as sales taxes,

service taxes, excise / import duties

and export duties levied on Labuan companies

since Labuan enjoys free port status

TAX BENEFITS TAX BENEFITS


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No Withholding Taxes

Royalties, interest and technical or management fees paid by Labuan company to non – resident person or Labuan

Company are exempted from income tax and thus not subjected to withholding tax (“WHT”).



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Exempt from Stamp Duty

Labuan companies qualify for stamp duty exemption on:

Instruments executed by Labuan company in connection with Labuan business activity.

Memorandum & Articles of Association of Labuan company.

Instruments of transfer of shares in a Labuan company.



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Personal Tax Exemption for Expatriates of Labuan Company

100% exemption on director fees

received by a non-citizen director

50% tax exemption on gross employment income

of a non Malaysian Resident working in a

managerial capacity in a Labuan financial institution



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Tax Rebate for Malaysians

50% tax exemption

on Labuan allowances and housing allowances

of Malaysian citizens working in a

Labuan financial institution



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WHY CHOOSE

LABUAN ENTITIES?

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Tax Planning Opportunities

outbound investment / international trading

international investment

leasing activities

holding Investment Company

WHY CHOOSE LABUAN ENTITIESWHY CHOOSE LABUAN ENTITIES


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A hub for

A Hub for Investments and International Trading


Malaysian Co.Malaysian Co. Labuan Co. (LC)Labuan Co. (LC)

ChinaChina

ThailandThailand

SingaporeSingapore

IndiaIndia

24 WHY CHOOSE LABUAN ENTITIESWHY CHOOSE LABUAN ENTITIES

A Hub for International Trading and Investments

Dividend income from the Labuan Company

– Dividend income received from the Labuan Company is tax exempt in Malaysia and world-wide under the participation exemption.

– Dividend income received is available for an exempt distribution in Malaysia.



A Hub for Investments and International Trading

Dividend income received is available for exemption as follows:-


ShareholdersShareholders

Labuan Co.Labuan Co.

Malaysian Co.Malaysian Co.

Exempt dividend

Exempt dividend


A Hub for International Investment

Labuan entities may be used to penetrate into

Asian market


Foreign Co.Foreign Co. Labuan Co. (LC)Labuan Co. (LC)ThailandThailand

SingaporeSingapore

VietnamVietnam

CambodiaCambodia


A Hub for Leasing Activities

Leasing business means:

Business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer regardless whether the letting is with or

without an option to purchase the property, including charters of ships,

“property” includes any plant, machinery, equipment or other chattel attached or to be attached to the earth

“charters of ships” means bareboat charters only and does not include the transportation of passengers or cargo by sea or the charter of ships on a voyage or time charter



Flow Chart



An annual license fee of MYR 40,000 is payable

plus MYR 20,000 for each subsequent transaction

conducted with Malaysian residents.

Labuan leasing companies providing lease facilities to non-

residents or conducting “out-out” transactions are

not required to pay annual fees or the subsequent

transaction fees.


30 WHY CHOOSE LABUAN ENTITIES?WHY CHOOSE LABUAN ENTITIES?

Patent, Royalty and Copyright HoldingIntellectual property including

– computer software, – technical knowledge, – patents, – trademarks and – copyrights,

can be owned by, or assigned to, a Labuan company.

The rights can be franchised to companies around the world and the resultant income may be accumulated in Labuan or distributed by the Labuan company free of withholding tax and received tax free under the participation exemption.


31 WHY CHOOSE LABUAN ENTITIES?WHY CHOOSE LABUAN ENTITIES?

Labuan IBFC: New Regulatory Updates

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New Legislation

Labuan Companies

Act 1990

Labuan Business

Activity Tax Act

1990

Labuan Financial Services

Authority Act 1996

Labuan Trusts Act

1996

Labuan Financial

Services and Securities Act

2010

Labuan Islamic

Financial Services and Securities Act

2010

Labuan Foundations

Act 2010

Labuan Limited

Partnerships And Limited

Liability Partnership

Act 2010


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Labuan Companies

Act 1990


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Modern company concepts

Restructure or reduce capital (without court approval)

Purchase or finance acquisition of own shares

Carry on business with residents

Dissolve without court approval and appointment of liquidator

Company record not open to public inspection

Issue no par value shares or fractions of shares

Labuan Companies Act 1990


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Labuan Business

Activity

Act 1990


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Labuan Business Activity Act 1990

Allowed

Shipping Operations in Malaysia “Labuan trading activity” includes banking,

insurance, trading, management, licensing,

shipping operations or any other activity which is not a Labuan non-trading activity

“Shipping operations” means the transportation of passengers or cargo by sea or the letting out on a charter of ships on a voyage or time charter basis – Section 2


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Labuan entities elect under Income Tax Act 1967 to re-engage DTA benefits

DTA BenefitsBenefits in source country

1. Business profits exempt

2. Lower withholding tax rates


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Information sharing

Malaysian Government will not permit fishing expeditions.

No automatic information sharing.

Prima facie case must be made out by the

Government making the request.


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Advance Ruling

Section 17B


Advance Ruling enables Labuan entities to seek a ruling of the Director General of IRB on the application of LBATA to Labuan entities.

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Labuan Financial Services

And Securities Act

2010


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Labuan Financial Services and Securities Act 2010


Securities lawsLabuan Insurance

Exchanges (LFX)

Labuan Trust Company

Labuan Banking

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Key Features

1. Make invitations to 50 persons without the Authority’s approval

2. Operate private funds without prior approval from any Authority

3. Operate in a strictly confidential and private business environment which is entrenched by Malaysian Statutes supported by fiercely independent government in Malaysia’s post-colonial era


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Key Features

4. Licensed insurance brokers being financial planners -

The new definition of insurance broker has been extended to expressly include a person who is licensed to “analyse the financial circumstances of another person and provides a plan to meet that other person’s financial needs and objectives…”

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Labuan Foundations

Act 2010


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Labuan Foundations (LF)

Labuan Foundations Act 2010

Capacity of LF

Founder of LF

Beneficiaries

Purpose and Objective

Management

S.50 LF is a body

corporate and may sue and be

sued in its corporate name

S.5(1)A resident or a non - resident

S.6(1)A resident or a non - resident

S.7(1) The main

purpose of LF shall be the

management of its property.

Founder act as an officer of LF

Property of LF cannot include

Malaysian property except

with prior approval from

authority or LF is charitable

Income derived from Malaysian property falls

under ITA 1967

Income derived from non -Malaysian

property falls under LBATA

S.7(2) LF may also

include other lawful objects

Provide for the appointment of

a council to manage LF.

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Labuan Foundations (LF)


Confidentiality:-

No information or documents

concerning LF may be divulged to a

third party unless with court order

Benefits

Asset protection:-

LF grants asset protection unless the assets are

fraudulently disposed to LF.

Unenforceability of a foreign claim

Distribution of assets :-

Permissible to beneficiary unless the

distribution is to defeat the

creditor claim.

Rights to information :-

Rights of beneficiaries to

request for information

concerning the property of LF


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Foundation is a legal entity.

Liability of foundation is limited to the value of its net assets.

Allows redomicilation of foundation into or out of Labuan.

Where LF is dissolved and there remains some property after its dissolution, those properties shall be the property of the beneficiary(ies).

A foundation can be deemed Islamic if it subscribes to Shariah principles and appoints a Shariah advisor.


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Labuan Trust Act

1996


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Labuan TrustAct 1996

Labuan Special Trust

Allow trust to hold shares in Labuan Holding Company,

which in turn may hold assets such as cash, real estate, art,

securities, businesses, insurance policies etc

Retention of day-to-day control over the direction and management of

investments and businesses can be held by a settlor or protector and the trustee

is not liable for losses.

Default provision : exist perpetuity

Flexibility for a fixed-term trust to be

converted to perpetual or vise versa

Purpose trust, charitable trust, promotion of religion,

advancement of human rights and fundamental freedom


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What are you waiting for?

Come to Labuan or visit our website at www.ectrustco.com and join the ranks of

successful companies and individuals

gaining the benefits of Labuan, Malaysia.

WHAT ARE YOU WAITING FOR? WHAT ARE YOU WAITING FOR?


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EC Trust (Labuan) Bhd.Wisma EC TrustU0195 Jalan Merdeka87007 Labuan F.TMalaysia

Tel : +60 87 453 858Fax: +60 87 453 616

Email: [email protected]: www.ectrustco.com

Thank you

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labuan ibfc: tropical paradise in the south china sea

Documents

labuan trading activity

labuan ibfc

labuan laws

labuan trading activities

labuan company formation

labuan intermediary

labuan nontrading activities

labuan financial services