substantially simplified and improved structures for protected cell companies (PCCs). In all, a total of four new pieces of legislation were passed covering Islamic finance, trusts and foundations, shipping and leasing, whilst the Companies Acts, including reference to holding companies and insurance entities, were substantially overhauled.


Malaysia has long been regarded as the world leader in Islamic finance,


and in the Labuan Islamic Financial Services and Securities Act (LIFSSA), 2010, which is in itself the world’s first comprehensive piece of Islamic Financial Services legislation, we have set the framework for Shariah- compliant captives to be established in Labuan in order to take advantage of the Island’s pre-eminent position in the global retakaful market.


As icing on the cake, the regulator, the Labuan Financial Services


Authority, will introduce guidelines in early 2011 that will enable Labuan licensed insurers (including captives) to co-locate to Kuala Lumpur and have full service operations there, subject to the concomitant availability of information in Labuan.


The ease with which the authority can be accessed is one of the jurisdiction’s unique selling points. In addition to carrying out its duties as the insurance regulator, the Registrar of Companies department is, with the Labuan FSA, the Authority and the Immigration Department, responsible for the issue of Work Permits to Labuan licensed entities, making it a truly ‘one-stop shop’ for the establishment of new companies.


The Regulator’s Charter requires that licences are issued within a maximum of 30 days from receipt of properly completed application documents, but the reality is that this period is often not required. The electronic system within the Registrar of Companies’ department allows for company incorporation within one day from receipt of a correctly completed application and the subsequent approval from the regulator for the granting of a licence can quickly follow.


Company registration fees are RM1,500 (approximately $480) per annum for a trading company and RM10,000 per annum ($3,200) for a captive licence. PCCs are required to pay an annual fee of RM30,000 for the core company and RM10,000 for each individual cell. The cells, however, may benefit from the paid-up capital of the parent. All applications must be made through a Labuan licensed trust company and a Labuan licensed insurance manager, and all captives that do not have resident expertise must likewise operate through a Labuan licensed insurance manager. There are 23 trust companies licensed in Labuan and six resident insurance managers, with other ‘managed-by- a-manager’ structures also in place owned by international insurance organisations. Trust company and insurance managers’ fees are flexible and negotiable depending on the amount of work required.


The Labuan fiscal structure is equally straightforward and uncomplicated. Labuan benefits from 63 out of Malaysia’s extensive array of 75 double taxation and tax information exchange agreements. Insurance entities, including captives, have the option of paying tax at a flat rate of RM20,000 ($6,400) per annum, or 3 percent of net profit (DTA/TIEA). In a unique twist to global fiscal planning, the option may be re-elected annually in advance to suit the company’s trading profile for the forthcoming year. Where the Malaysian DTA / TIEA system does not benefit a Labuan company, then the Labuan entity may alternatively


elect to be taxed under the Malaysian Income Tax Act at the standard Malaysian tax rate of 25 percent.


The minimum paid-up capital for a Labuan captive is RM300,000 for


a pure captive or RM500,000 for an association captive or protected cell structure. A 20 percent margin of solvency is required and, where appropriate, a parental guarantee may be required by the regulator.


At the present time, the Labuan FSA does not require sight of the reinsurance programmes of captives based in Labuan, but at the time of application, an outline of the reinsurance protection proposed for the captive must be submitted as part of the documentation package, and the Authority may require further and more detailed information from time to time. Captives may reinsure any market chosen by the management and owners of the company. They are not restricted to reinsuring with Labuan reinsurers or retakaful companies, although as previously mentioned, the Island’s extensive market of 28 conventional reinsurers and six retakaful companies, writing between them a total of $1.2 billion in annual premium makes an easy and attractive option for the global captive manager.


From the annual double-digit growth in the number of captives being registered in Labuan, and the increasing number of enquiries that we are receiving, it is clear that the island is rapidly becoming a jurisdiction of choice for the forward-thinking captive insurance manager. And the beaches are nice too.


David Kinloch is chief executive officer of Labuan International Business and Financial Centre. He can be contacted at: david@labuanibfc.my


About Labuan IBFC Labuan International Business and Financial Centre (Labuan


IBFC) offers global investors and financial service providers all the benefits of being in a leading international financial centre, as well as access to 63 of Malaysia’s vast network of double- taxation treaties.


As an integrated financial services centre, Labuan IBFC is increasingly becoming a jurisdiction of choice for investment holding companies, and offers a wide range of products such as captive insurance, trusts, foundations, fund management, leasing, international banking, estate planning and wealth management. Investors can enjoy the benefits of Labuan’s cost- efficient and market-friendly business environment, supported by professional service providers specialised in all aspects of international tax, trust and law.


This international financial services centre, off the coast of


Sabah, Malaysia is also as a hub for Islamic finance, especially in areas of sukuk issuance and listing, takaful and re-tafakul, shariah- compliant captive structures and Islamic trusts and foundations.


For more information please visit www.LabuanIBFC.my


38 emea captive 2011


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44