Leasing Through Labuan Has Attractive Tax Savings For Shipping Industry 
April 05, 2010 15:09 PM
KUALA LUMPUR, April 5 (Bernama) -- Many corporations and small medium enterprises (SMEs) in the shipping business remain unaware of the significant tax benefits involved when leasing ships through Labuan.
As such, they spend more than what is really needed, said Sue Yong, Managing Director of Equity Trust (Labuan).
Speaking at a seminar co-organised by OCBC Bank (Malaysia)Bhd and Equity Trust (Labuan) Limited here recently, she also said the favourable tax regime and regulatory environment in Labuan, has helped both foreign and Malaysian-based companies lower operating costs through innovative leasing structures.
She highlighted that leasing through the Labuan International Business and Financial Centre (Labuan IBFC) involves enormous tax benefits - such as taxation at three per cent of net audited profit or a flat tax of RM20,000 instead of the usual 25 per cent.
Unfortunately, she said many remain either unaware of or indifferent to this opportunity to better manage their funds," she said in a statement today.
The seminar, "Labuan IBFC for Ship Owners," was held at Menara OCBC and attended by participants from various companies involved in the shipping business.
Besides the generous tax benefit, Sue also said offshore companies registered in Labuan, have no withholding tax nor stamp duty on offshore transactions.
She said with the exception of the transportation of passengers or cargo by sea or letting out on charter of ships on voyage or time charter basis, Labuan Offshore Companies are allowed to carry on the leasing of ships on a "bare boat" basis.
The seminar was also told that, with recent changes to the Malaysian insurance law that allows direct access to the reinsurance market through the removal of the requirement for fronting companies, Labuan has become even more cost-effective and attractive.
Speaking at the same seminar, David Kinloch, Chief Executive Officer of Labuan IBFC said that, previously, risk prevention measures required a fronting company that would take up to 10 per cent in commission before reinsuring to a captive insurer.
However, he said with the change in regulation after April 1 last year, a fronting company is no longer required and, with direct access to the reinsurance market, about 50 per cent of costs spent on risk prevention may now be saved.
Kinloch said Labuan is strategically located with access to developing economies such as China and India.
In Labuan, he added, setting up a company is a quick and simple exercise, and approvals come from a one-stop regulator, the Labuan Offshore Financial Services Authority (LOFSA).
He also said that operationally, costs are lower in the jurisdiction without sacrificing quality, with access to expertise and world-class infrastructure.
The half-day event provided an avenue for stakeholders in maritime financing to gain insights into the opportunities at Labuan IBFC and risk-based capital management through captive insurance as well as tax incentives involved.
Commenting on the need for the seminar, Jeffrey Teoh, Head of Commercial Banking, OCBC Bank, said as one of the few banks in Malaysia with a dedicated ship financing team, it has over the last three years undertaken to provide insights into vessel financing for the benefit of those involved in the industry.
"We are aware that the bulk of SMEs operating in the shipping industry are not fully aware of the benefits associated with Labuan IBFC and they are missing out on opportunities that could bring untold benefits," he said.
Teoh also said the thrust of the briefing centred on the question of why a company should lease vessels through Labuan IBFC also consider setting up its own captive insurance company.
He said many companies such as international airlines, and major shipping, oil exploration and real estate companies are already reaping the rewards of having done so.
"By locating their captive insurance bases and/or establishing a leasing company at Labuan IBFC, companies get to enjoy generous tax benefits, innovative products, financial expertise and exceptionally low costs of operation.
"Progressive regulations and clear laws further ensure maximum security and transparency," he explained.
-- BERNAMA
As such, they spend more than what is really needed, said Sue Yong, Managing Director of Equity Trust (Labuan).
Speaking at a seminar co-organised by OCBC Bank (Malaysia)Bhd and Equity Trust (Labuan) Limited here recently, she also said the favourable tax regime and regulatory environment in Labuan, has helped both foreign and Malaysian-based companies lower operating costs through innovative leasing structures.
She highlighted that leasing through the Labuan International Business and Financial Centre (Labuan IBFC) involves enormous tax benefits - such as taxation at three per cent of net audited profit or a flat tax of RM20,000 instead of the usual 25 per cent.
Unfortunately, she said many remain either unaware of or indifferent to this opportunity to better manage their funds," she said in a statement today.
The seminar, "Labuan IBFC for Ship Owners," was held at Menara OCBC and attended by participants from various companies involved in the shipping business.
Besides the generous tax benefit, Sue also said offshore companies registered in Labuan, have no withholding tax nor stamp duty on offshore transactions.
She said with the exception of the transportation of passengers or cargo by sea or letting out on charter of ships on voyage or time charter basis, Labuan Offshore Companies are allowed to carry on the leasing of ships on a "bare boat" basis.
The seminar was also told that, with recent changes to the Malaysian insurance law that allows direct access to the reinsurance market through the removal of the requirement for fronting companies, Labuan has become even more cost-effective and attractive.
Speaking at the same seminar, David Kinloch, Chief Executive Officer of Labuan IBFC said that, previously, risk prevention measures required a fronting company that would take up to 10 per cent in commission before reinsuring to a captive insurer.
However, he said with the change in regulation after April 1 last year, a fronting company is no longer required and, with direct access to the reinsurance market, about 50 per cent of costs spent on risk prevention may now be saved.
Kinloch said Labuan is strategically located with access to developing economies such as China and India.
In Labuan, he added, setting up a company is a quick and simple exercise, and approvals come from a one-stop regulator, the Labuan Offshore Financial Services Authority (LOFSA).
He also said that operationally, costs are lower in the jurisdiction without sacrificing quality, with access to expertise and world-class infrastructure.
The half-day event provided an avenue for stakeholders in maritime financing to gain insights into the opportunities at Labuan IBFC and risk-based capital management through captive insurance as well as tax incentives involved.
Commenting on the need for the seminar, Jeffrey Teoh, Head of Commercial Banking, OCBC Bank, said as one of the few banks in Malaysia with a dedicated ship financing team, it has over the last three years undertaken to provide insights into vessel financing for the benefit of those involved in the industry.
"We are aware that the bulk of SMEs operating in the shipping industry are not fully aware of the benefits associated with Labuan IBFC and they are missing out on opportunities that could bring untold benefits," he said.
Teoh also said the thrust of the briefing centred on the question of why a company should lease vessels through Labuan IBFC also consider setting up its own captive insurance company.
He said many companies such as international airlines, and major shipping, oil exploration and real estate companies are already reaping the rewards of having done so.
"By locating their captive insurance bases and/or establishing a leasing company at Labuan IBFC, companies get to enjoy generous tax benefits, innovative products, financial expertise and exceptionally low costs of operation.
"Progressive regulations and clear laws further ensure maximum security and transparency," he explained.
-- BERNAMA
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