Victoria of Labuan, the Pearl of Borneo, is best known as a financial centre and for its duty-free shopping in the otherwise reserved federal territory of Malaysia. Patronised by offshore investors and banking businesses seeking financial licensing, as well as savvy bargain-hunters alike, this is a guide for those interested in setting up a money-broking business in this special economic zone – Labuan International Business and Financial Centre (Labuan IBFC).
In November, Labuan IBFC will host its annual conference on international financial crimes and terrorism financing; it has also recently established a leading partnership with the China Construction Bank. Such achievements shadow Labuan’s humble origins at its birth almost three decades ago and it’s journey to becoming an autonomous regional financial centre.
Moving from offshore to midshore, Labuan’s success alludes to the marketing and shaping of oneself into a financial hub that is distinctively designed for the Asian financial markets. The Labuan Financial Services Authority (Labuan FSA) is the statutory body in charge of the administration and growth of the Labuan IBFC. Located strategically, it serves both the surrounding Southeast Asian markets as well as the greater continent of Asia; a quarter of all it’s established corporate entities are based in Asia. Authorities are deliberate to revise Labuan’s financial landscape as globalisation and disruptive technologies morph into existence, making the offshore jurisdiction a compatible and vibrant locale for licensing business entities.
Benefits of Business Entity Formation in Labuan
Labuan’s repositioning as a midshore jurisdiction does not reduce its attractiveness for licensing since jurisdictions as such continue to offer tax benefits and a favourable exchange rate over and above an internationally-recognised financial licensing framework. In Labuan, foreigners are also granted the right to own their businesses completely as a single individual. Other advantages of Labuan business entity formation are as follows:
- Situated in Malaysia,it shares a common time zone with major financial hubs like Singapore and Shanghai
- Midshore jurisdiction status allows companies to trade in Malaysian local market
- Labuan’s waiver of exchange controls allow business to be carried out through foreign currencies
- An entry to Malaysia’s double taxation treaty network comprising more than 70 countries
- Major tax exemptions on directors’ fees, dividends, capital gains and import or sales tax
- Under the Labuan Business Activity Tax Act 1990, 3% tax is imposed on trading activities and none on non-trade activities
- Rapid incorporation and remote operation
- Muslim-majority country means Labuan operates on the basis of both international as well as Shariah-adhering conventions
- Offers licensing to a large number of financial entities under different categories (refer to infographic below for details)
The federal territory can be considered a one-stop solution for licence-seekers and operates a wide range of finance businesses, including money-brokering. Harvest the most of your resources by contacting DesFran today for your company formation needs. DesFran is focused on helping businesses expand and seek new opportunities whenever and wherever possible.
Interview with Labuan IBFC Inc CEO, The Edge Malaysia Weekly
Labuan FSA, Malaysian International Islamic Financial Centre
Resource Centre, Labuan International Business and Financial Centre, Malaysia
About the Authors
Joyce Sun is Strategic Communications and Research Intern at DesFran. Joyce enjoys learning as she writes financial news blurbs and editorials involving financial regulatory developments due to her keen interest in equities and finance-related topics. She is a final year honours student at the National University of Singapore hoping to pursue a career in the finance industry, and to continue developing her knowledge in investments.
Joey Tan is Strategic Communications and Research Manager at DesFran. Joey has a flair for creatives and is always keen on improving and upgrading herself within the realm of the financial services industry. She manages the strategic communications and marketing initiatives in DesFran and has a keen interest in financial licensing and regulations. Joey is a sociology graduate from the University of Buffalo.