Speaking at the opening of the Symposium, she said, “After all, we do live in an ever-changing world, and like every other jurisdiction, Labuan IBFC has to also make the required changes to ensure an uninterrupted history of compliance which is essential to the reputation of Labuan IBFC, Labuan Financial Services Authority (Labuan FSA) and Malaysia itself.”
According to Farah, the asset leasing sector too, will have to change to meet the needs of international standards of transparency and substance. The leasing industry, which reached nearly USD1 trillion its overall global annual volume in 2017, has been undergoing numerous tax and regulatory changes. In the Asian region, in particular, the industry is expected to grow between 10% and 18% in the next five years.
She added that whilst some of these amendments are seen as game changing, it is important to remember these requirements are not in excess of what is prescribed by global standard setting bodies, and as such it is a question of time before these standards will soon be adopted by other jurisdictions.
A key driver to the introduction of the refreshed Guidelines is to ensure Labuan IBFC remains relevant and complies with the Organisation for Economic Co-operation and Development (OECD)’s ring harmful Base Erosion Profit Shifting (BEPS), particularly to Action 5 Report of BEPS that looks at counteax practices.
The revised areas under the Guidelines issued by Labuan FSA on 29 December 2017 include:
It is possible for outsourcing arrangements with prior approval from Labuan.
On the whole, it is expected that the changes to the Guidelines not only serve to ensure the jurisdiction adheres to international standards of taxation, it will also ensure that all leasing operations in Labuan IBFC meet the substantive needs for substance as dictated by global multilateral organisations such as a the OECD.
Farah added that whilst change has never been easy, a lucrative future is still there to be had for those who embrace it and work within its new parameters in order to carve out an opportunity for themselves.
As such, Labuan IBFC is confident these imminent changes will further strengthen the midshore jurisdiction’s proposition to become a preferred hub for asset leasing in the region.
For more information, please refer to the Guidelines here.