ZRC INTERNATIONAL TRUST INC

A. Introduction

 

 

Leasing is the business in which one company may obtain the use of certain fixed or movable assets for which it pays a series of contractual, tax deductible payments. It is the words “tax deductible” that we find have added value in respect of the offshore version of such contracts. Many corporations in the shipping business remain unaware of the significant tax benefits involved when leasing through Labuan IBFC.

 

The corporation spends more than what is really needed. The favourable tax-regime and regulatory environment in Labuan help both local and foreign companies to lower their operating costs through innovative leasing structures. Leasing transactions in the oil and gas (O&G) and aviation industries led to the growth of the Labuan Financial Services Authority (Labuan FSA) in 2009. Assets leased increased by 23.9 per cent to US$21.9 billion (RM69.6 billion)*, mainly as a result of the leasing of floating production systems and offshore support vessels for the O&G sector. *(source from the Central Bank of Malaysia).

 

The leasing industry in Labuan IBFC has recorded tremendous growth in recent years. In tandem with the region’s economic growth, demand for capital equipment, especially in the shipping, aviation, and oil and gas industries, have shown no signs of abating. Its innovative leasing structures and close proximity to emerging economies such as China and India attract both local and foreign corporations, opening up a variety of investment opportunities in the region.

 

Leasing companies in Labuan IBFC enjoy an ideal balance of fiscal neutrality and certainty. The ease through which leasing transactions can be structured in the jurisdiction, along with an efficient tax framework, have also allowed for effective management of their operational cost.

 

A normal leasing transaction includes earning rental income for the lessor, and the lessee benefiting from the leased asset, for example in providing short-term capital and facilitating business operations.

 

 

B. Labuan Leasing 

 

 

Labuan leasing is defined under the Act as the business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer, regardless whether the letting is with or without an option to purchase the property, including charters of ships. Property includes any plant, machinery, equipment or other chattel attached or to be attached to the earth, and charters of ships means bareboat charters only and does not include the transportation of passengers, cargo by sea or the charter of ships on a voyage or time charter basis. Leasing businesses could be transacted via conventional means or in accordance with Shariah principles.

 

 

C. Typical Labuan Leasing Structure 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D. Labuan Leasing Application Requirements 

 

An applicant is required to submit an application of which the submission should include the following:

 

• A business plan detailing the operations of the applicant and the nature of the leasing transactions, including whether they would be conducted with residents or non-residents

• Group corporate shareholding structure

• Diagram of leasing transaction

• The composition of the board of directors for the proposed leasing company; and

• Any other information that may be relevant to the application.

 

 

E. Labuan Leasing Operational Requirements 

 

An approved leasing company is required to:

 

• Maintain bank account(s) under its name preferably in Labuan IBFC and Malaysia to facilitate the leasing operation including lease remittances / lease rentals

• Comply with any other requirements of the changes being effected by Labuan FSA from time to time

• Ensure that the lease agreement is duly stamped and endorsed by the Collector of Stamp Duties, at the Stamp Duty Office of the Inland Revenue Board of Malaysia

• Transact business only in foreign currency and not deal in Malaysian Ringgit except for the purpose of defraying administrative and statutory expenses as permitted under the Financial Services Act 2013

• Notify Labuan FSA of any changes to its constituent documents and business plans within 30 days

• Obtain approval from Labuan FSA on any new appointments or changes to its directorship and shareholding information

• Notify Labuan FSA on the termination and extension of any leasing transactions within 30 days upon the termination / extension

• Conduct its business with due diligence and sound principles and comply with the laws and regulations where it conducts its leasing business

• Ensure all transactions are done through Labuan, and adequate and proper records and books of accounts are maintained in Labuan

• Ensure all its leased assets are adequately insured; and

• Ensure all leasing transactions with its related party comply with the transfer pricing rules issued by the related party’s relevant authorities.

 

 

F. Labuan Leasing Applicable Fees 

 

All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year:

 

Annual Fee          

 

• RM 60,000 (Lease to Malaysian Resident)

• No fee imposed for lease to Non-Malaysian Resident

 

Each Subsequent Leasing Transaction

 

• RM 20,000 (Lease to Malaysian Resident)

• No fee imposed for lease to Non-Malaysian Resident

 

 

 

G. Labuan Leasing Key Benefits

 

• Income derived from leasing business will be taxed at 3% or at flat tax of MYR20,000.00

• No withholding tax on dividends paid by a Labuan Company out its profit

• Lease rental paid by Malaysian Resident to Labuan Company are tax deductible expense.

• Allow leasing business to be carried out with Malaysian Resident

• No license fee imposed for dealing with non-resident.

 

 

 

Our dedicated teams are more than happy to assist you in establishing, structuring and planning your Labuan leasing and licensing application. Contact us today at info@zrctrust.com for free initial consultation without any obligation.