Labuan: Law of Offshore
Table of Statutes
This is a non-exhaustive list of the main Malaysian statutes affecting Labuan, and its offshore and non-resident business. Click on the statute for a fuller description of the statute, the legal regime it forms part of, or in some cases the text of the law.
Anti-Money Laundering Act 2001
Anti-Money Laundering (Invocation of Part IV (No.2)) Order 2003
The Malaysian Companies Act 1965
Mutual Assistance in Criminal Matters Act 2002
The Offshore Companies Act 1990
The Labuan Trust Companies Act 1990
The Offshore Banking Act 1990
The Offshore Insurance Act 1990
The Labuan Offshore Business Activity Tax Act 1990
The Labuan Offshore Trusts Act 1996
The Labuan Offshore Limited Partnerships Act 1997
The Labuan Offshore Security Industry Act 1997
Labuan Offshore Security Industries (Amendment) Act 2003
Labuan Financial Services and Securities Act 2010
In February 2010, new laws which, it is hoped, will substantially improve Labuan’s competitive edge in international financial markets came into effect.
A total of four new acts, together with radical amendments to a further four existing laws, completely changed the way in which Labuan carries on its financial services business. With the enactment of the new laws, the Labuan Offshore Financial Services Authority was re-named the Labuan Financial Services Authority (Labuan FSA).
Dato Azizan Abdul Rahman, the Director-General of Labuan FSA said: “These far-reaching changes cover all financial activities in Labuan International Business and Financial Centre – from banking, insurance, leasing and company incorporation right through to the creation of Islamic financial products and services. Apart from that, the changes have taken into consideration all aspects so that we are ahead of accepted international standards and practices.”
In particular, an additional clause to the Labuan Offshore Business Activity Tax Act has enabled the island to adopt the internationally-agreed Organization for Economic Cooperation and Development standard for the exchange of information for tax purposes in double taxation agreements (DTAs).
It provides power to the Director General of Inland Revenue to call for information from any person as he may require for the purpose of compliance with any DTAs entered into by the government of Malaysia. It allows the disclosure of any information on a DTA to any authorised agent of the government with whom Malaysia’s government has made such an agreement, and upon a request from a tax authority of any government of any country outside Malaysia.
Furthermore, any person may request for an advance ruling from the Director General of Inland Revenue on the application of any provision of the Tax Act to a particular type of arrangement. Subject to certain qualifications, a ruling issued under this proposed section is binding on the person who requested for such ruling and on the Director General of Inland Revenue.
The new laws allow for the creation of Labuan foundations, limited liability partnerships, protected cell companies (insurance and mutual funds), shipping operations, Labuan special trusts and financial planning activities. These complement the existing available range of products and services and aim to provide investors with a wider choice of financial products to maximise investment opportunities.
In April, 2006, LOFSA subscribed to World-Check, a leading provider of structured intelligence on high and heightened risk individuals and entities, to screen applications for licences. The move allows LOFSA to conduct verification checks based on the World-Check database, which contains information on high or heightened risks, such as terrorists, fraudsters, money launderers, Politically Exposed Persons (PEPs), arms dealers and sanctioned entities, amongst many other categories.
World-Check also gathers information on its targets' networks and associates to ensure comprehensive coverage.