Offshore Market

Offshore Market

1. Characteristics

   • Tax regime
     • Favourable (low tax with maximum of RM20,000 / $5,000) No income tax, no stamp duties, no withholding tax, no dividend tax, no service charges, etc)
   • Government control
     • Little or no intervention (no FOREX control)
   • Regulation
     • Regulated by Labuan Financial Services Authority (Labuan FSA) – globally recognized regulatory structure)
   • Location
     • Labuan (independent state with its own laws) At national boundaries At sea – some distance from the shores
   • Participants
     • Malaysians Foreigners, investors Multinational companies

2. Offshore Company

   • Offshore Trading company
     • Generates profits by buying and selling products or services to customers in international markets
     • Dealing in banking, insurance, trading, management, licensing and any activity which is not an offshore non-trading activity
   • Offshore non-trading company
     • Activity is related to the holding of investments in securities, stocks, shares, loans, deposits and immovable properties on its own behalf.

3. Labuan Financial Services Authority (Labuan FSA)

   • Established in 1996 Purpose: develop & administer Labuan International Business and Financial Centre (Labuan IFC)
   • Roles and functions
     • To develop national objectives, polices and priorities
     • To focus on the development and promotion
     • To supervise the business and financial activities and operations
     • To administer and enforce the financial services legislations

4. Labuan International Business and Financial Center (Labuan IBFC)

   • Provide large spectrum of financial services and products for corporations and individuals (Islamic & conventional)
   • Key areas
     • Highly flexible tax framework
     • Progressive legislative environment
     • Competitive operating costs
     • Focused marketing efforts
     • Strategic location
     • Increasing holding companies establishment
     • Leading the captive insurance business
     • Active participants in Islamic finance
     • Enhanced customer service

5. Tax Structure

   • Offshore Trading Activity
     • 3 % of net profit per audited account or RM 20,000
   • Offshore Non-trading Activity:
     • Not subject to tax
   • Both offshore trading and non-trading activity
     • 3 % of net profit per audited account or RM 20,000

6. Labuan Business Activities

   • Banking
     • Savings account = min $5,000 Current account Can withdraw using $, Sterling and Euro
   • Insurance & Takaful
     • For risk solution related to import export transactions, FOREX, etc
   • Leasing
     • Due to high demand for capital equipment especially in aviation, shipping, o&g industries.
   • Factoring
     • Business of acquiring debts to any person / institution at a discount (as approved by Labuan FSA)
   • Money Broking
     • Arrange transactions between buyers and sellers in MM
   • Commodity Trading
     • Trade physical and related derivative instruments in any currencies other than MYR. The commodities include petroleum, refined raw materials, chemicals, agriculture products, etc.
   • Credit Token Business
     • A business where a token (cheque, card, voucher, stamp, booklet, coupon, form, etc) is given to a person by the person carrying on the business.
   • Company Management Business
     • Provide treasury processing services (processing & confirming deals, preparing accounting records, maintaining files, etc) & Islamic advisory services (consultancy, development of Islamic trusts, etc)