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SCMP Reporter

LABUAN island is being groomed by Malaysia as an offshore banking, trust and insurance haven of the next century.

  Kuala Lumpur began a move in this direction in 1990 with a number of acts of parliament that freed up the banking sector and adjusted tax laws.

  The Finance Ministry designed the regulations to benefit multinational investors: legislation was kept to a minimum to allow Labuan to compete with well established offshore centres.

  Laws protecting confidentiality and secrecy were included: public inspection of company files and records is restricted and there are prohibitions on disclosing shareholding and beneficial ownership, except where this is required by the special local banking acts.

   The Trust Companies Act of 1990 prohibits officers of trust companies from disclosing the existence of trusts or the identity of settlors, appointees or beneficiaries.

    Labuan also has an attractive tax regime, especially for people who are investing in Malaysia's fast-growing manufacturing sector, with special allowances on investment tax.

  Offshore companies pay a minimum three per cent tax a year, or M$20,000 (about HK$60,000) tax, or a fee of M$20,000 to the Registrar of Companies.

  Tax is waived on many income sources, including dividends received from Malaysian resident companies, and other offshore companies or distributions from trusts. Most other royalties and management fees are exempt. So is interest.

  Expatriates managing or working for offshore companies need not pay tax on half of their gross income for six years from assessment. There are no sales taxes, excise or import duties, except on petroleum.

  The income tax relief is part of Malaysia's strategy to make Labuan more than merely another tax front for transnational corporations.

    Malaysia's vision is that Labuan will become a functioning financial centre, the way in which Ireland's Dublin Customs House development has by attracting financial companies from around the world.

    Labuan is well equipped with commercial office space. An exclusive financial park is being developed that will have office buildings, residential complexes and leisure facilities, private clubs and an international school.

  Labuan is connected to 192 countries by Intelsat business satellite services, and has a full range of other communications services available.

    Labuan airport is being upgraded, with the Government having budgeted US$29.2 million to build a new terminal and upgrade the runways.

  The island has two main wharves and nine private jetties, which meet all projections of demand past 2000.

  It is off the coast of Sabah and Sarawak, the Malaysian states that are on Borneo. The island is 92 square kilometres has an estimated population of 35,000 people.



Changes make Labuan tax haven