The following Amendment Acts have been gazetted on 9 June 2022 and are deemed to have come into operation on 1 January 2019:
- Labuan Companies (Amendment) Act 2022;
- Labuan Financial Services and Securities (Amendment) Act 2022; and
- Labuan Islamic Financial Services and Securities (Amendment) Act 2022
These three Amendment Acts 2022 contain amendments to the Labuan Companies Act 1990, Labuan Financial Services and Securities Act 2010 and Labuan Islamic Financial Services and Securities Act 2010.
Labuan Companies (Amendment) Act 2022
Labuan was never intended to be a “tax haven,” and the government of Malaysia has always been on guard against the possibility that it will be abused to facilitate international money laundering.
Following the implementation of the Base Erosion and Profit Shifting (BEPS) Action Plan in 2013 by the OECD and G20 countries, which led to the development of minimum standards and best practice in tax, Malaysia has committed to implementing and adhering to these minimum standards.
Ring-fencing
One of the most crucial objectives of the Labuan Companies (Amendment) Act 2022 is to eliminate away with provisions that are linked to the ring-fencing features.
When a preferential tax regime or tax incentive explicitly or implicitly excludes resident taxpayers from taking advantage of its benefits, or when an entity that benefits from the regime is explicitly or implicitly prohibited from operating in its domestic market, this is referred to as “ring-fencing” the regime or incentive.
Therefore, the restrictions and notification requirements in subsections (4), (5) and (6) of section 7 of the principal Act relating to Labuan companies’ transactions with residents and Malaysian Ringgit are repealed by this amending Act as they are no longer applicable.
Requirements relating to Resident Director
A Labuan company is required to have at least one director, and that director can be a resident director, according to the provisions of Section 87(1) of the Principal Act. This provision will be changed such that it stipulates that a Labuan company must have at least one resident director among its board of directors,
Please refer to the Amendment Acts for other amendments made to the Principal Act:-
Labuan Financial Services and Securities (Amendment) Act 2022
Labuan Islamic Financial Services and Securities (Amendment) Act 2022
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