Labuan IBFC to introduce competitive tax structure

LABUAN: The Labuan International Business and Financial Centre (Labuan IBFC) is expected to introduce a more competitive tax structure by year-end to suit the current global economic environment, said Bank Negara Malaysia Governor Datuk Muhammad Ibrahim.

“The global (economic) environment keeps changing, so we have to change Labuan’s tax structure and make it more competitive to suit national and international requirements,” he told a press conference after presenting the Labuan Financial Services Authority ( Labuan FSA) Annual Report 2016 yesterday.

Established in 1990, Labuan IBFC, the marketing arm of Labuan FSA offers attractive tax exemptions under the Labuan Business Activity Tax Act, 1990 (LBATA). For instance, a Labuanbased company carrying out trading activities within Labuan IBFC would be taxed at three per cent based on its audited accounts.

In addition, Labuan registered companies are given the flexibility to pay an annual flat rate of RM20,000 instead.

Asked if the tax restructuring measures would draw more companies to establish a presence in Labuan, Muhammad believed investors would choose the centre that offered them the best value.

“It is not necessarily the structure that offers the lowest tax rate is the best.It should also include other important factors such as the ease of doing business, efficiency, effectiveness and regulatory structure.

“If Labuan IBFC can offer a better value for investors, we should

The global (economic) environment keeps changing, so we have to change Labuan’s tax structure and make it more competitive to suit national and international requirements. Datuk Muhammad Ibrahim, Bank Negara Malaysia Governor

be able to attract them, “he said.

Asked if the new tax structure would help to increase the registration of the US companies in Labuan following US President Donald Trump’s tax cut plan, Muhammad said the new tax structure would have a diversified interest for worldwide companies.

“If the tax-structure over relied on any particular geopolitical locations, it is not a good one,” he added.

Last year, Labuan IBFC attracted 790 new established companies, slightly lower than the 836 recorded previously. Of the 13,260 companies registered in 2016, 12.4 per cent were from the Americas (namely British Virgin Islands, Cayman Islands and the United States of America), up from eight per cent in 2015.

Muhammad said based on the better global economic growth projected by the International Monetary Fund (IMF) and the World Bank recently, Labuan IBFC should reap the benefits.

“The better global growth will provide more businesses opportunities, and we should expect better prospects for Labuan over the next few years,” he said. — Bernama