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Labuan - Amendment Act

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There have been several amendments to the Labuan Acts which were gazetted on 9 June 2022. The amendments will apply retrospectively from 1 January 2019.
  

Consistency with BEPS Action 5

The amendments to the Labuan Acts are consistent with the requirements under BEPS Action 5. BEPS Action 5- Harmful Tax Practices counters harmful tax practices with a focus on improving transparency.
  
The main amendments remove the restrictions to Labuan businesses from dealing with residents and allow transactions to be conducted in Ringgit. Below please find the corresponding amendments: 
  • Labuan Companies Act ("LCA")
    Previously no Labuan company shall carry on business in Ringgit with some exemptions. The amended Act removes this restriction imposed on Labuan companies  when transacting with Malaysian residents.
  • Labuan Financial Services and Securities Act 2010 (“LFSSA”)
    Previously, the LFSSA included the definition of domestic insurance business. With the new amended LFSSA, the definition for “Domestic Insurance Business” has been removed (Section 101 of LFSSA). With this, the licensed Labuan insurance broker can now serve domestic insurance businesses. 
  • Labuan Islamic Financial Services and Securities Act 2010 (“LIFSSA”)
    Section 76(1) of LIFSSA previously defined “Labuan takaful business” as takaful business which is not domestic takaful business and should be transacting in foreign currency. The amended definition under LIFSSA removes these exclusions. In other words, a Labuan takaful business can be a domestic insurance business and may transact in Malaysian currency.

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