British Virgin Islands: Labuan – Coming Of Age As An Offshore Financial Service Centre

Last Updated: 29 November 2000
Article by Susan Kan

Labuan, as an offshore jurisdiction, has come a long way since it was launched as an International Offshore Financial Centre exactly ten years ago. The original intention of using Labuan in complementing Kuala Lumpur in its quest to become a regional financial hub has now been significantly changed. Labuan has since widened its focus and scope of activities to the outside world and in particular, the Asian Pacific region, which is still a rapidly growing region despite being affected by the recent financial crisis.

Though it is just 10 years old, Labuan has been successfully competing with the more established offshore jurisdictions in recent years. The recent OECD report (on harmful tax competition) in which Labuan was not named, has drawn attention to the fact that Labuan is not only a competitive offshore financial services centre but also maintains a high level of international credibility.

Where is Labuan? For the uninitiated, Labuan is off the north west coast of Borneo island, in the Bay of Brunei in South China Sea. It is strategically located in the heart of the Asia Pacific region and easily accessible by daily flights. It is a short hop from Kota Kinabalu and Brunei, and only a two hour flight from Kuala Lumpur. It also shares the same time zone with Singapore and Hong Kong, and visitors from either one of these places can reach Labuan within a four hour flight journey normally.

Labuan, being a Federal Territory, is centrally administered by the Federal Government of Malaysia. The Federal Government has invested substantially to build up the physical infrastructures so as to cater for the needs of the various offshore players. Major projects to date include the Financial Park, Labuan Airport, Hospital and Telecommunications infrastructure.

In tandem with the physical infrastructures provided by the Government, Labuan has, within a short span of time, built up a solid base of professional service providers. There are currently 60 plus banks, all of them have an active presence in Labuan and these banks are among the top 200 banks in the world. In addition, the offshore insurance sector has grown by leaps and bounds. As at end of September 2000, the number of insurance and insurance related service providers in Labuan has almost reached 80.

Though a substantial volume of business in the offshore insurance sector involves the more traditional insurance and re-insurance products, there is also a growing trend in the use of captive and more recently, rent-a-captive vehicles. Insinger Brumby Trust (Labuan) Sdn Bhd ("Insinger Brumby"), a member of the Insinger de Beaufort group, has been actively involved in the area of captives in consultation with the Labuan Offshore Financial Services Authority ("LOFSA"), culminating in the recently launched innovative rent-a-captive product from Labuan called the "Big MAC". This rent-a-captive structure overcomes the problems traditionally associated with protective cell models in that risks are carried within each individual entity basis and there is no pooling of assets and liabilities (for insurance risks) within one single entity as practised by the protective cell models.

Trust companies also feature prominently in Labuan as a major group of service providers. Their services include trade support work, offshore trusts, offshore fund administration, corporate restructuring and international tax planning, taking advantage of the low or zero tax regime provided by Labuan and the substantial number of tax treaties signed between Malaysia and other countries.

For the more sophisticated tax planners, Insinger Brumby recommends the use of its innovative "Malaysian Satay" structure which essentially uses the tax treaties signed between Malaysia and other countries to create a tax beneficial vehicle linking Malaysia, the offshore regime of Labuan and a business enterprise in a third country. The benefits of using such a structure allows income such as dividends, interests, royalties to be levied with minimal income tax and withholding tax.

There are also new developments in the mutual fund industry. Fund management specialists may wish to set up a private Mutual Fund (with minimum red tape) to take advantage of the low tax regime offered by Labuan and the tax treaties signed between Malaysia and other countries. Another development is that Labuan can now be used to provide "back room" work and support for offshore companies incorporated and managed in other offshore jurisdictions. Due to the low rental costs for office space and relative cheaper manpower cost in Labuan as compared to the more expensive offshore centres like Bermuda, Cayman and BVI, Labuan may be considered a better alternative. In fact, financial centres like Hong Kong and even Singapore are presently using Labuan for this purpose.

No doubt, there will be more innovative products to be developed by the offshore players in consultations with LOFSA. The smart partnerships between the offshore players and LOFSA augurs well for the further development on the offshore industry in Labuan. Insinger Brumby is currently holding discussions with LOFSA for the development of more new offshore products.

Labuan, through its constant diversification, innovation and full support by the authorities, has indeed come of age as an offshore financial service centre. At the end of the day, a complete and mature offshore financial service centre should always be measured by the quality and variety of services that it provides rather than by the sheer volume of registrations of cheap offshore companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions