The Labuan Financial Services Authority (“FSA”) introduced comprehensive guidelines for the establishment of Labuan Securities Licensees, including Islamic Securities Licensees, which took effect on 1 January 2014.

A Labuan securities licensee provides valuable investment advice or administrative services concerning securities for investment and dealing purposes. For Labuan Islamic securities licensees, operations must comply with Shariah principles.

Individuals or entities intending to engage in securities licensee activities can submit their applications to Labuan FSA. Kensington Trust Labuan Limited, a licensed trust company in Labuan, is ready to assist with license applications, establishment, and administration of Labuan entities.

A Labuan securities licensee is not permitted to hold clients’ monies or assets and is differentiated from a Labuan fund manager by the nature of its principal activity, which is the provision of management services.

To be eligible to apply for a Labuan securities license, an individual should possess relevant degrees or professional qualifications to carry out securities licensee activities. Additionally, individuals with a minimum qualification of a diploma and 3 years’ relevant experience in the capital market may be considered. The Labuan FSA may also evaluate applicants based on other factors.

• Processing Fee (once-off): USD 350
• Annual Fee: USD 1,500

The annual license fee becomes payable upon approval by Labuan FSA and remains valid until 31 December of the year of approval. All licensees must pay the annual license fees by 15 January of each calendar year.

Labuan securities licensees need to adhere to certain operational requirements, including maintaining a specified level of paid-up capital, professional indemnity insurance, and a registered office in Labuan. They must also appoint approved auditors, ensure compliance with Shariah principles for Islamic securities licensees, and notify Labuan FSA of any relevant changes.

The taxation system for Labuan entities is governed by the Labuan Business Activity Tax Act 1990 (“LBATA”). This Act regulates tax imposition, assessment, and collection for business activities in, from, or through Labuan. It also defines "Labuan business activity" and stipulates regulations for substance requirements, which came into effect on 1st January 2019.

Labuan entities can conduct transactions with residents of Malaysia in Ringgit Malaysia, subject to certain restrictions. Deductions allowed for payments made by residents to Labuan entities vary based on the type of payment.

Labuan securities licensees benefit from several advantages, including zero withholding tax on payments of dividends and interest to non-residents, no import duty or sales tax, no foreign exchange controls, and no capital gains tax or inheritance tax. Additionally, Labuan IBFC has Double Tax Agreements with over 70 countries and offers a 100% exemption for director’s fees received by non-citizen directors of Labuan companies.