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Labuan: Country and Foreign Investment

Executive Summary

Labuan is centrally located in South-East Asia

Labuan is part of Malaysia and is well located in the centre of the ASEAN region. 92 sq km in size, with a population of about 85,000, Labuan is mostly flat, with a good harbour and an airport served by MAS and other airlines. Labuan was used by the British as a coaling station during the 19th century, and was eventually incorporated into the Malaysian Federation. Ethnically, Labuan has a mixed Asian population; Bahasa Malaysian is the official language, but English is widely used. The climate is tropical and there are extended monsoon periods.

LOFSA runs the offshore sector . . . .

The Government sees Labuan's future in terms of its financial sector, and in 1990 created the Labuan Offshore Financial Services Agency (although 'Offshore' has since been dropped from the title) alongside a batch of 'offshore' laws. Labuan companies can make use of Malaysia's extensive double tax treaty network, and as a result the island has become a preferred conduit for FDI to a number of ASEAN countries. A stock exchange was established in 2000, aiming particularly at the listing of Islamic financial debt issues, and has had considerable successes.

. . . and the tax regime is benign.

Malaysian taxes are moderately high, although on a territorial basis, but Labuan offshore companies engaged in trade pay 3% tax or can elect to pay a fix sum of RM20,000 (approx. US$6,500); all other offshore companies are exempt. There are many incentives and exemptions which make it possible for most mainland Malaysian profits to be repatriated through Labuan without tax. Many expatriate workers can take advantage of personal tax incentives.

LOFSA is encouraging e-commerce

LOFSA is determined that Labuan should become a successful e-commerce hub, and has built e-commerce infrastructure which can be used by incoming e-commerce operations, as well as by the island's new financial markets.



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