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Labuan Leasing
Labuan leasing is defined 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.
- 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.
- 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
- An approved leasing company is required to:
- Have sufficient and positive capital or working funds which commensurates with the Labuan leasing business3 at all times. Labuan FSA may exercise its discretion to require a Labuan leasing company to inject additional capital, taking into account its business profile as well as nature, scale, complexity and diversity of their business activities.
- Ensure that the directors and officers responsible for the management of the company meet the Fit and Proper Person requirements as specified in the Guidelines on Fit and Proper Requirements issued by Labuan FSA.
- Establish an adequate set of internal policies and controls for its operations, compliances, corporate governance and risk management. These need to be regularly reviewed to ensure that they remain appropriate, relevant and prudent.
- Ensure that all its leased assets are adequately insured. In this regard, Labuan leasing companies are encouraged to primarily secure the insurance coverage for their leased assets/properties from Labuan-based insurance companies and takaful operators prior to securing the services of other insurance players elsewhere. For this purpose, the requirement of paragraph 12 would need to be observed prior to entering into such insurance arrangement.
- Maintain adequate and proper records and books of accounts in Labuan in line with the Directive on Accounts and Record-keeping Requirement for Labuan Entities issued by Labuan FSA. Its name and company number must be clearly indicated on its letterhead, stationery and other documents.
- Maintain bank account(s) under its name preferably in Labuan IBFC and/or Malaysia to facilitate the leasing operations including any lease remittances/lease rental payment transactions.
- The lease agreement shall be stamped and endorsed by the Collector of Stamp Duties, at the Stamp Duty Office of Inland Revenue Board of Malaysia, Labuan branch.
- Ensure that all leasing transactions with any of its related party are conducted at arm’s length basis and are subjected to the transfer pricing rules and guidelines issued by the relevant authorities.
- Obtain prior approval from Labuan FSA for:
(i) each new and subsequent leasing transactions. In this regard, no leasing transaction shall be undertaken prior to Labuan FSA’s approval;
(ii) establishment of office outside Labuan and establishment or acquisition of subsidiary;
(iii) change of lessee and leased asset;
(iv) change of shareholders of more than ten per centum; and
(v) appointment of directors. - Notify Labuan FSA within 30 days pertaining to the following matters:
(i) resignation of directors;
(ii) any change of information with regard to the place of business or office in Labuan;
(iii) any changes to the constituent documents and business plan which is not tantamount to the change of lessee and leased asset. This may include the change of its company name; and
(iv) termination / extension of any leasing transactions. - The Labuan leasing company has to establish substantial activities and perform strategic functions in Labuan. In this regard, the substance requirements should include but not limited to the following factors:
(i) Physical presence: Maintain an operational office in Labuan. The operational office should be used for business purposes only and must be appropriately furnished with office equipments4;
(ii) Key leasing activities: The core income generating activities are expected to be carried out from the Labuan office. Typically, the activities may include identifying and acquiring of assets to be leased, negotiating leasing terms, soliciting lessees, management of leased assets and financing the acquisition of assets;
(iii) Employment: Have adequate number of full-time employees with necessary qualification, skills or experiences in the relevant fields related to the leasing business3; and
(iv) Annual business spending: Have incurred adequate business spending in Malaysia including Labuan in undertaking the Labuan leasing business3. - Comply with applicable laws, rules and regulations relevant to the leasing business, including relevant guidelines issued by Labuan FSA and regulatory requirements of the jurisdictions where Labuan leasing business is authorised to operate in (where applicable). Labuan leasing company is expected to obtain necessary approvals from the relevant authorities in the market it intends to operate prior to commencing its business in those respective markets and provide a copy of the approvals to Labuan FSA.
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3 Considerations shall include but not limited to the following factors:
(i) volume of the business;
(ii) value of the asset leased; and
(iii) leasing arrangement, i.e. operating or finance lease.
4 For a group with more than one Labuan leasing companies may share the same office.
- The annual licence fee and approval fee for each subsequent leasing transaction are payable to Labuan FSA to undertake a Labuan leasing business dealing with Malaysian resident and non-resident. Pursuant to Section 189 of LFSSA and Section 150 of LIFSSA, the payment of annual licence fee is payable latest by 15 January of each year.Type of FeesAmountAnnual FeeRM 60,000Each Subsequent Leasing TransactionRM 20,000
Governing Legislation
- Labuan Financial Services and Securities Act 2010
- Labuan Companies Act 1990
- Labuan Business Activity Tax Act 1990
For a complete list of all Labuan laws, please click here.
Related Guidelines and Circulars
Relevant Materials
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