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Leasing Through Labuan Has Attractive Tax Savings For Shipping Industry
KUALA LUMPUR, April 5 (Bernama) -- Many corporations and small medium enterprises(SMEs) in the shipping business remain unaware of the significant tax benefitsinvolved when leasing ships through Labuan.
As such, they spend more than what is really needed, saidSue Yong, Managing Director of Equity Trust (Labuan).
Speaking ata seminar co-organised by OCBC Bank (Malaysia)Bhd and Equity Trust (Labuan)Limited here recently, she also said the favourable tax regime and regulatoryenvironment in Labuan, has helped both foreign and Malaysian-based companieslower operating costs through innovative leasing structures.
Shehighlighted that leasing through the Labuan International Business andFinancial Centre (Labuan IBFC) involves enormous tax benefits - such astaxation at three per cent of net audited profit or a flat tax of RM20,000instead of the usual 25 per cent.
Unfortunately, she said many remain either unaware of or indifferent tothis opportunity to better manage their funds," she said in a statementtoday.
The seminar,"Labuan IBFC for Ship Owners," was held at Menara OCBC and attendedby participants from various companies involved in the shipping business.
Besides thegenerous tax benefit, Sue also said offshore companies registered in Labuan,have no withholding tax nor stamp duty on offshore transactions.
She saidwith the exception of the transportation of passengers or cargo by sea or lettingout on charter of ships on voyage or time charter basis, Labuan OffshoreCompanies are allowed to carry on the leasing of ships on a "bareboat" basis.
The seminarwas also told that, with recent changes to the Malaysian insurance law thatallows direct access to the reinsurance market through the removal of therequirement for fronting companies, Labuan has become even more cost-effectiveand attractive.
Speaking at the same seminar, David Kinloch, ChiefExecutive Officer of Labuan IBFC said that, previously, risk preventionmeasures required a fronting company that would take up to 10 per cent incommission before reinsuring to a captive insurer.
However, hesaid with the change in regulation after April 1 last year, a fronting company isno longer required and, with direct access to the reinsurance market, about 50per cent of costs spent on risk prevention may now be saved.
Kinloch said Labuan is strategically located with accessto developing economies such as China and India.
In Labuan,he added, setting up a company is a quick and simple exercise, and approvalscome from a one-stop regulator, the Labuan Offshore Financial ServicesAuthority (LOFSA).
He also said that operationally, costs are lower in thejurisdiction without sacrificing quality, with access to expertise andworld-class infrastructure.
Thehalf-day event provided an avenue for stakeholders in maritime financing togain insights into the opportunities at Labuan IBFC and risk-based capitalmanagement 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 Malaysiawith a dedicated ship financing team, it has over the last three yearsundertaken to provide insights into vessel financing for the benefit of thoseinvolved in the industry.
"Weare aware that the bulk of SMEs operating in the shipping industry are notfully aware of the benefits associated with Labuan IBFC and they are missingout on opportunities that could bring untold benefits," he said.
Teoh alsosaid the thrust of the briefing centred on the question of why a company shouldlease vessels through Labuan IBFC also consider setting up its own captiveinsurance company.
He saidmany companies such as international airlines, and major shipping, oilexploration and real estate companies are already reaping the rewards of havingdone so.
"By locating their captive insurance bases and/orestablishing a leasing company at Labuan IBFC, companies get to enjoy generoustax benefits, innovative products, financial expertise and exceptionally lowcosts of operation.
"Progressive regulations and clear laws further ensure maximumsecurity and transparency," he explained.-- BERNAMA
