Labuan Issues Guidelines For International Commodity Trading Companies
Tuesday, January 22, 2013
The Labuan Financial Services Authority (LFSA) has issued guidelines applicable
to all Labuan international trading companies (LITCs) licensed to conduct international
commodity trading business in the Labuan International Business and Financial
Center (LIBFC) under the Global Incentives For Trading (GIFT) program.
The guidelines, which went into effect on January 1, 2013, and supersede those
previously-issued on October 31, 2011, cover a Labuan international commodity
trading business involved in the trading of physical and related derivative
instruments of petroleum and petroleum-related products including liquefied
natural gas (LNG), agriculture products, refined raw materials, chemicals and
base minerals. An LITC can deal only with non-residents in any currency other
than Malaysian ringgit.
In addition, within five years after the date it obtained its license, an LITC
must have a minimum annual turnover of USD100m; minimum annual business spending
of MYR3m (USD995,000) payable to Malaysian residents; and at least three professional
Malaysian-resident traders employed with a minimum salary of MYR15,000 per month
Under the GIFT program, a general LITC is subject to a corporate tax rate of
3%, but an LITC set up purely as an LNG trading company is entitled to a 100%
income tax exemption on chargeable profit for the first three years of its operation,
provided the company is licensed before December 31, 2014.
The LITC is required to maintain a registered office in Labuan, which is the
office of its Labuan trust company. However, the LITC is allowed to establish
its operational office(s) anywhere in Malaysia, while being required to provide
the details of that office to the LFSA upon commencement of business. It must
also ensure that its business is conducted with a proper corporate governance
and risk management framework in place.
Other tax incentives applicable for an LITC include a 100% exemption on
fees paid to non-Malaysian directors of the LITC; a 50% exemption on gross employment
income of non-Malaysian professional and managerial staff, including traders
with the LITC; an exemption on dividends received by or from the LITC; an exemption
on royalties received from the LITC; an exemption on interest received by residents
or non-residents from the LITC; and a stamp duty exemption on all instruments
for Labuan business activities and the transfer of shares.