Financial Services
Areas of Business:
Overview
Labuan IBFC offers Global Incentives for Trading (GIFT) programme which provides a set of incentives for traders of specified commodities to use Labuan as their international trading base. Such traders are licensed as Labuan International Commodity Trading Companies (LITCs) which deal with eligible commodities which include petroleum and petroleum related products including liquefied natural gas; as well as trading of other physical products such as minerals, agriculture products, refined raw materials, chemicals, base materials and coal. The LITCs are required to establish operational office, which can be in any part of Malaysia.
Frequently Asked Questions
The Global Incentives for Trading (GIFT) programme, launched in collaboration with the Malaysia Petroleum Resources Corporation (MPRC), is aimed at positioning Malaysia as a regional trading and storage hub for oil and gas including other key commodities such as minerals, agriculture products, refined raw materials, chemicals, based minerals and coal.
A Labuan international commodity trading business is the trading of physical and related derivatives of petroleum and petroleum-related products including liquefied natural gas (LNG), minerals, agriculture products, refined raw materials, chemicals, based minerals and coal. Labuan international commodity trading companies used Malaysia as their international trading base to undertake international commodity trading business in Labuan IBFC.
The Labuan international commodity trading company (LITC) must have sufficient capital/working funds that commensurate or are in accordance with its operations and activities. Upon licensing, the LITC must ensure the following:
LITC must comply with the following conditions after the granting of its licence and commencement of its business :
The permitted activities include buying, selling and /or broking of physical and related derivative instrument of petroleum and petroleum-related products including liquefied natural gas (LNG) as well as other key commodities such as minerals, agriculture products, refined raw materials, chemicals, based minerals and coal.
The LITC is allowed to establish its operational office(s) and operate anywhere in Malaysia but it must have its physical office in Labuan to house its two FTE to manage the daily operations of the activities out of its Labuan office.
The rate of tax imposed is 3% of audited net profits.
Labuan is a duty-free zone, hence there are no indirect taxes.
Post 17 April 2020, new Labuan companies that intend to trade in Non-Petroleum commodities are required to be part of the GIFT programme.
Apart from tax incentives as accorded under LBATA 1990 subject to fulfillment of the tax substantial activity requirements, the non-deductability rules under P.U (A) 375/2018 dated 31st December 2018 is not applicable to transactions between LITC and Malaysian resident.
The revised Guidelines have reinstated the Non-Petroleum commodities to be included back into the GIFT programme. For regulatory purpose and to enable the company to enjoy the tax incentives under GIFT programme, the Non-Petroleum LITCs that have surrendered their licences should submit its application for licensed as soon as practicable.
For regulatory purpose, the policy expectation all the compliance to the revised Guidelines should be made on practical basis ie, assessment against a full year's operation as regards the annual quantitative requirements.
However, for purpose of complying with tax substantial activity requirements, once licensed, it is deemed to have commenced operation and is subjected to the said requirements. For annual operating expenditure however maybe pro-rated on a 12 month basis.
LITCs that are unable to achieve the operational requirements under the revised Guidelines would be treated as non-compliance to the said Guidelines and to be dealt with accordingly under the Labuan Financial Services and Securities Act 2010. Notwithstanding this, the LITCs may write to Labuan FSA if they foresee that they are unable to meet any of the operational requirements. Labuan FSA may consider the application based on the merit of each case.
The definition of Professional Traders has been expanded under the revised Guidelines in which Principal Officer and any officer performing senior managerial functions in specified areas may also be recognised as Professional Traders.
Para. 6.7 is to cater for LITCs that are undertaking businesses that are ancillary to the trading of permissible commodities such as leasing, trading, consultancy etc. Hence, proper segregation of accounts is required.
The LITCs are still allowed to operate in any parts of Malaysia. For the purpose of complying with the tax substantial activity requirements to enjoy the benefits accorded under the GIFT programme, Labuan FSA wishes to further clarify the following:
(1) the 2 full time employees (to be based at its physical office in Labuan) need not be the professional traders. The said employees are expected to manage the daily operations of the activities out of its Labuan office. For LITC that have already had its existing professional traders and wish to maintain them at its operational office outside Labuan, the LITC is required to hire additional 2 employees (any level) to be based in Labuan; and
(2) the RM100,000 is part of the RM3 million annual operating expenditures required under the revised Guidelines. The annual operating expenditures may be pro-rated on a 12-months basis upon commencement of LITC’s operations.
5-Step Guide to Applying for a Labuan Banking License
1
Fill up the application form with required details.
2
Pay via LEPAY (USD 350 for normal, USD 1,550 for fast track). Keep the receipt as proof.
3
Email a PDF copy of the form and documents to bplicensing@labuanfsa.gov.my.
4
Labuan FSA may request further information; respond promptly to avoid delays.
5
Processing takes 30 working days (normal) or 15 days (fast track). Labuan FSA will notify you of the outcome.
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