Labuan, 2 July 2024: The Prime Minister of Malaysia, YAB Datuk Seri Anwar Bin Ibrahim, in his keynote address at the Global Forum on Islamic Economics and Finance (GFIEF) on 28 May 2024, announced the Labuan IBFC’s Islamic digital finance sandbox which will be known as “i-BOX”. The i-BOX will be introduced together with an incentive package to further promote the establishment of Islamic digital banks in the Labuan IBFC. The i-BOX will serve as a catalyst for developing Labuan as an Islamic international financial hub by enticing new entrants to establish Labuan Islamic digital banks, which will provide banking facilities and support to entities operating under the Islamic Digital Asset Centre (IDAC) initiative. The announcement by the Prime Minister aligns with the issuance of Labuan Business Activity Tax (Exemption) Order 2024 (Order) that exempts four types of Labuan entities including Labuan Islamic digital bank from the payment of tax in respect of any of its income derived from a qualifying activity as specified in the Order which takes effect from the year of assessment 2024 (YA2024) until the year of assessment 2028 (YA2028).

Designed to attract interested parties and qualified fintech firms, the i-BOX incentive package would encourage the establishment of Islamic digital banks in Labuan that adhere to Shariah principles. Successful applicants will be admitted into i-BOX for three years and will benefit from the following incentives:

1. Exemption from complying with Section 63(2)(e) of the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA), to present a three-year audited balance sheet to meet the licensing criteria;
2. Five years’ employment pass for professional expatriate to work in Labuan or Malaysia;
3. Tax exemption for a period of five years commencing from YA2024 until YA2028; and
4. Co-located office anywhere in Malaysia upon obtaining a licence to conduct Labuan Islamic digital banking business.

While the i-BOX seeks to accelerate the expansion of Islamic digital banking sector in Labuan IBFC, it also to encourage participants to thrive and compete by leveraging on technological advancements and embrace product innovations. This would create a unified regulatory framework for Islamic digital finance on an international scale by facilitating collaboration and establishing a common ground, thereby fostering a more efficient and interconnected Islamic digital finance ecosystem.