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GRAND OPENING DINNER TAICHUNG BANK CO., LIMITED LABUAN BRANCH 

Speech by, 
Mr Danial Mah Abdullah Director-General, Labuan FSA

12 November 2018 
Dorsett Grand Labuan Hotel


Mr. Wang Kuei-Fong, Chairman, Taichung Bank 

Mr. Chia Te-Wei, President, Taichung Bank 

Encik Khairudin Abd Rahman, Chairman, Association of Labuan Banks 

Ladies and gentlemen, a very good evening to all of you. 


1.  First and foremost, I would like to thank Taichung Bank for inviting me to this dinner to celebrate the opening of Taichung Bank Limited, Labuan Branch. On behalf of Labuan FSA and the financial community of Labuan IBFC, let me extend our heartiest congratulations to Taichung Bank, and to its management and staff. 

2.  This is indeed an auspicious event as Labuan IBFC now has a family of three banks from Taiwan being established in Labuan IBFC. To-date, there are 55 banks doing business in Labuan IBFC. I would like to applaud and thank Taichung Bank for taking this wise strategic move to establish its presence here, for choosing Labuan as a jurisdiction to operate their business in the Asia Pacific region. This will augur well for Labuan IBFC as it has always intended to further expand its products and services to investors, business corporate or individuals from the region, including Taiwan.

3.  Over the nearly three decades since its formation in 1990, Labuan has made itself known as the regional preferred jurisdiction for financial and non-financial businesses. Its strategic location, incentivised operating environment, cost efficiency and pragmatic regulatory regime have contributed to the growth of the centre. Labuan IBFC has become an important gateway for tapping investment opportunities in the growing Asia-Pacific region. We believe the growth momentum of Labuan IBFC will continue in the foreseeable future, at least if not more for the next three decades. The establishment of Taichung bank is certainly a testament to this optimism. 

Ladies and Gentlemen,

4.  As you are aware, in recent years, the calls for greater regulatory harmonisation and adoption of international best practices have increased and Labuan IBFC like many other financial centres’ need to adapt and evolve with the changes globally to maintain and improve our international standing and competitiveness. One of the many initiatives being undertaken currently is rationalisation of Labuan IBFC’s regulatory framework and review of its legislation to meet the requirements of international standards.

5.  On this matter, I believe all of you here have heard in the 2019 Budget speech by the Minister of Finance Malaysia recently on the proposed changes to modernise the Labuan IBFC tax framework. The major changes are: 

     i. The removal of ring fencing elements by abolishing restrictions on dealing with Malaysian residents and           transacting in Ringgit Malaysia for Labuan entities; 

    ii. There will no more option on taxation i.e. choosing 3% or RM20,000. So all Labuan trading entities,         

         including banks, must pay 3% tax on its profits; and

    iii. Substance requirements will be introduced.  

6.  There are other changes including the issue of deductibility of expenses in the accounts of residents, and income from intellectual properties. These changes are done to align Labuan tax regime with international requirements particularly under the Forum for Harmful Tax practices of OECD countries and also to address tax leakages in the dealing with residents. While the tax obligations of financial institutions in Labuan IBFC may have increased as it is no longer allowed to choose for RM20,000, we believe the 3% charge is still very competitive to continue to attract players to conduct their businesses out of Labuan.

7.  Talking about business, Labuan FSA certainly encourages the financial institutions here to innovate and expand their financial products and services. There are lots of opportunities to do just that based on the current business friendly regulatory regime. For example, in recent times, Labuan FSA has received many applications to conduct business in the crypto world. We are open to this new wave of business and have licensed some entities to do this so long as they comply with the necessary regulations and obligations relating to AMLA and reporting of transactions. 

8.  Indeed, as part of its roles, Labuan FSA will continue to have regular dialogues with the industry associations representing the players to discuss on regulatory matters and business developments to propel Labuan IBFC to international investors. In this regard, we encourage Taichung Bank to tap on its membership in the Association of Labuan Banks by engaging actively with the other members to build business and to create a vibrant inter-bank market between Labuan banks. We also hope that you, through its operations in Labuan, will bring the necessary expertise and technology to Labuan to help us build up and enhance the talent and competency pool in Labuan and the financial centre. 

Ladies and Gentlemen, 

9.  On this note, let me once again congratulate Taichung Bank on its auspicious opening and convey our best wishes for a very successful banking business journey in Labuan IBFC for the many years ahead. 

Thank you.

 




Danial Mah Abdullah
Director General of Labuan FSA
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