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FIN435 CHAPTER 6 OFFSHORE MARKET
869
Transcript
CHAPTER 6:
OFFSHORE MARKET
FATHIN FATHIHAH BINTI HEDZIR 2019326459
WHAT IS OFFSHORE MARKET ???
INTRODUCTION
- a market where funds are moved actively by market participant in an offshore financial center having specific and unique characteristics.
- products and services are offered by offshore companies that meet the needs in a low tax regime and moderately or lightly regulated jurisdictions.
WHAT IS LEARNING OBJECTIVES ?
OBJECTIVES
- To understand the objectives and characteristics
- To know the regulations and activities.
WHAT IS CHARACTERISTIC OF OFFSHORE MARKET ?
CHARACTERISTICS
#1
Low tax environment that give opportunities for offshore companies.
#1
#2
#2
Minimum exchange control requirements that enable the offshore banks to mobilize funds.
#3
Large number of financial institutions offering numerous products and services to meet the specific needs of the market
#3
#4
Maximum confidentiality through the appointment of nominee owners and directors .
#4
#5
#5
Excellent physical infrastructure and communication networks .
ADVANTAGES OF USING OFFSHORE CENTER
ADVANTAGES
Tax efficiency
#1
- Reduce the tax obligations to attract investor
- Labuan International Offshore Financial Centre imposes low taxes on income, profit, dividend and interest earned derived from the offshore business activities.
- It complicated and need to guided by an experienced professional
#2
confidentiality
- maintains high degree of secrecy under the Labuan Companies Act 1990
- limitation on public inspection of company files
- prohibition from disclosure of; shareholding or beneficial ownership, management and any of the business, financial or other affairs of the company other than in compliance with the law.
- Court hearing against any offshore company will be held in camera (other than criminal proceedings).
- Protection of identities, accounts and affairs of customers of Labuan offshore banks.
- Prohibition from disclosure of information and documents of customers’ accounts.
easy administration
#3
- The legal obligations of any directors or officers of an offshore company are often much less.
- Saving time and money.
asset protection
#4
- an offshore company can be valuable as a vehicle for holding assets such as intellectual property or real estate investments.
lower set up and maintenance costs
#5
- Even with increasing anti money-laundering measures being applied and block funding for terrorism and prevent the proceeds of criminal activities, the process of setting up an offshore company can be relatively fast and simple.
- lower costs in both the establishment and maintenance of an offshore company
lower capital requirement
#6
- By registering will require minimal capital.
- In certain jurisdictions there is in fact no capital needed for registration.
MAIN OFFSHORE FINANCIAL CENTRES
- Bahamas
- ▪British Virgins Iceland
- ▪Jersey
- ▪Panama
- ▪Bermuda
- ▪Singapore
- ▪New Zealand
- ▪Luxembourg
- ▪Labuan.
OFFSHORE MARKET IN MALAYSIA?
OFFSHORE MARKET IN MALAYSIA
Labuan International Business and
Financial Centre (LIBFC).
LIBFC
ABOUT
About LIBFC
- ▪Established on 1 October 1990
- ▪Operating under IOFC regulations primarily engage in foreign currency businesses for residents and non-residents.
- To enhance attractiveness of Malaysia as investment center:
- ➢Government declared the Federal Territory of Labuan as an Labuan International Offshore Financial Centre (LIOFC).
- ▪ Now known as Labuan International Business and Financial Centre (LIBFC).
OBJECTIVES
Objective LIBFC
- To enhance the attractiveness of Malaysia as an investment center
- To form part of the national strategy to diversify the growth opportunities of the nation.
- To supplement the onshore financial system centered in KL.
- ▪To strengthen the contribution of financial sector to the progress of diversified economic growth.
ROLES
Roles LIBFC
- Sole official agency in Asia Pacific
- Advices Labuan FSA about business sectors and acts as a reference for all investors into Labuan IBFC.
- Help to incorporate a Labuan company via Labuan trust company and documents for application.
- Labuan company is governed by Labuan Companies Act 1990.
FINANCIAL SERVICES
Financial services by LIBFC
- Banking operation
- ▪Insurance and related business
- Corporate funding
- ▪Investment and trust management
- ▪Investment holding companies
- ▪Professional services and other related services.
Labuan Financial
Services Authority (LFSA)
LFSA
ABOUT
ABOUT LFSA
- Established on 15 February 1996.
- ✓ Previously known as Labuan Offshore Financial Services Authority (LOFSA).
OBJECTIVES
OBJECTIVES LFSA
- To promote and develop Labuan as an international centre
- To develop national objectives, policies and priorities
- To act as the central regulatory, supervisory and enforcement authority
LAWS
LAW OF LFSA
- ▪Labuan Companies Act 1990
- ▪Labuan Business Activity Tax Act 1990
- ▪Labuan Trusts Act 1996
- ▪Labuan Financial Services Authority Act 1996
- ▪Labuan Financial Services And Securities Act 2010
- ▪Labuan Islamic Financial Services And Securities Act 2010
- ▪Labuan Limited Partnerships and Limited Liability Partnerships Act 2010
- ▪Any other laws relating to business and financial services in Labuan.
FUNCTIONS
FUNCTION
LFSA
- To maintain the good reputation of Labuan IBFC
- To carry out research and commission studies in Labuan IBFC
- To make recommendations for the creation and improvement of facilities
- To collaborate with financial institutions and industry associations
- To advise and make recommendations to the government
- To exercise, discharge and perform
Offshore Trading and
Non-trading Companies
The Labuan Companies Act 1990 provides for the establishment of offshore companies and the registration of foreign offshore companies (foreign company incorporated under the laws of another country) in Labuan.
Offshore Trading and Non-trading
Companies
offshore company may be :
1. limited - by share / guarantee
2. unlimited
OFFSHORE COMPANY
offshore company may be :
1. limited - by share / guarantee
2. unlimited
About
Involve in trading or non-trading business activities; Business transactions may involve
residents or non- residents
* Residents and non-residents of Malaysia are permitted to establish offshore companies in Labuan.
LABUAN TRADING ACTIVITY:
Trading
- banking
- insurance
- trading
- management
- licensing
LABUAN NON-TRADING ACTIVITY:
Non-Trading
- holding of investments in securities, stocks, shares, loans, deposits or properties by a Labuan entity on its own behalf.
Offshore Banking
and Trust Companies
Offshore Banking and Trust Companies
LABUAN TRUST COMPANIES
WHAT IS TRUST COMPANIES
- registered under the Labuan Companies Act 1990 (LCA)
- licensed under the Labuan Financial Services and Securities Act 2010.
ABOUT
ABOUT
- A Labuan company must employ the services of a trust company
- establish a functional office in Labuan, at least have 2 approved trust officers
- provides the registered office, resident secretary and secretarial duties
- provide management and accounting services
- offers a wide range of services
OFFSHORE BANKING
WHAT IS OFFSHORE BANKING
Offshore company is one that you incorporate or register in another country where its principle investors live.
OFFSHORE BANKING BUSINESS
- Providing credit facilities
- ▪ Receiving deposits
- ▪ Offshore investment banking service
- ▪ Islamic banking business
- ▪ Building credit business
- ▪ Development finance business
- ▪ Leasing business
Why ???
WHY USE AN OFFSHORE COMPANY
- Low or zero taxes
- Ease of international operations
- Freedom from state regulation
- Multi-currency funding of accounts out of the country
ADVANTAGES
ADVANTAGES OFFSHORE COMPANY
- Asset Protection
- Privacy
- Simplicity
- Tax Optimization
- Low Capital Requirements
- Flexibility
ENTRY REQUIREMENTS
- MUST a bank or financial institution
- Possesses a sound track record
- Good credit rating by acceptable rating agencies
- Supervised by a competent regulatory authority
- Conforms to generally accepted standards of international banking practices
LIST OF LABUAN BANK
- AFFIN BANK BERHAD LABUAN BRANCH
- AMANAHRAYA INVESTMENT BANK LTD
- AMINTERNATIONAL (L) LTD.
- BANK ISLAM MALAYSIA BERHAD, LABUAN OFFSHORE BRANCH
- BANK MUAMALAT MALAYSIA BHD, LABUAN OFFSHORE BRANCH
Tax Structure and Incentives
Tax Structure and Incentives
ABOUT
- Under the Labuan Offshore Business Activity Tax Act 1990 (LOBAT)
- Not registered as offshore companies- do not enjoy preferential tax treatment.
- Individual resident in Labuan will continue to be taxed under Income Tax Act 1967.
- Non-residents will be taxed only on income derived from Malaysia.
DEFINITION
The tax structure of an economy depends on its tax base, tax rate, and how the tax rate varies
DEFINITION
A tax incentive is an aspect of a country's tax code designed to incentivize or encourage a particular economic activity
BENEFIT OF TAX INCENTIVES
BENEFITS
- increased employment
- higher number of capital transfers
- research and technology development,
- improvement to less developed areas.
- Dividend paid out or received are not subject to tax.
- ✓No withholding tax on royalties, interest, technical or management fees paid to a non-resident or another.
- ✓No sales tax, import duties, excise duties and export duties except for petroleum and petroleum products.
- All instruments made in connection with an offshore business activity are not subject to stamp duty.
EXEMPTIONS FROM TAX
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