Wednesday, February 24, 2010
New laws which, it is hoped, will substantially improve Labuan’s competitive edge in international financial markets came into effect this month.
A total of four new acts, together with radical amendments to a further four existing laws, will completely change the way in which Labuan carries on its financial services business. With the enactment of the new laws, the Labuan Offshore Financial Services Authority will be re-named the Labuan Financial Services Authority (Labuan FSA).
Dato Azizan Abdul Rahman, the Director-General of Labuan FSA said: “These far-reaching changes cover all financial activities in Labuan International Business and Financial Centre – from banking, insurance, leasing and company incorporation right through to the creation of Islamic financial products and services. Apart from that, the changes have taken into consideration all aspects so that we are ahead of accepted international standards and practices.”
In particular, an additional clause to the Labuan Offshore Business Activity Tax Act will enable the island to adopt the internationally-agreed Organization for Economic Cooperation and Development standard for the exchange of information for tax purposes in double taxation agreements (DTAs).
It provides power to the Director General of Inland Revenue to call for information from any person as he may require for the purpose of compliance with any DTAs entered into by the government of Malaysia. It allows the disclosure of any information on a DTA to any authorised agent of the government with whom Malaysia’s government has made such an agreement, and upon a request from a tax authority of any government of any country outside Malaysia.
Furthermore, any person may request for an advance ruling from the Director General of Inland Revenue on the application of any provision of the Tax Act to a particular type of arrangement. Subject to certain qualifications, a ruling issued under this proposed section is binding on the person who requested for such ruling and on the Director General of Inland Revenue.
The new laws allow for the creation of Labuan foundations, limited liability partnerships, protected cell companies (insurance and mutual funds), shipping operations, Labuan special trusts and financial planning activities. These complement the existing available range of products and services and aim to provide investors with a wider choice of financial products to maximise investment opportunities.