Labuan Insurance Brokers

A Labuan insurance and insurance related company in Labuan IBFC is governed by Part vii of Financial Services & Securities Act 2010. A Labuan insurance broker may establish a takaful broking window and no separate licence is required.

Labuan insurance broker” means a person who is licensed to -

  1. arrange Labuan insurance business on behalf of prospective or existing policy owners;
  2. arrange Labuan reinsurance business on behalf of any insurer seeking reinsurance; or
  3. analyse the financial circumstances of another person and provides a plan to meet that other person’s financial needs and objectives, whether or not a fee is charged in relation thereto

 

APPROVED AND RESTRICTED BUSINESS ACTIVITIES

(1)  APPROVED ACTIVITIES

  • Direct insurance business
  • Life insurance
  • Reinsurance business

(2)  RESTRICTED ACTIVITIES

The Labuan insurance broking company is prohibited from dealing with residents (except for high net-worth individuals, reinsurance and others as defined by Labuan FSA from time to time) and broke for direct Malaysian risks.

“High net worth individuals” in the above context are defined as persons who spend an equivalent of not less than RM20,000 in any foreign currency on single premium policy or an equivalent of not less than RM15,000 per person in any foreign currency on annual premium policy.

 

APPLICATION FOR LICENCE

Application for a licence to carry out Labuan insurance broking activities can be made to the Director General of Labuan FSA.

Kensington Trust Labuan Limited is a licensed trust company in Labuan and is able to assist you with license application, establishment and administration of your Labuan company or branch.

 

OPERATONAL REQUIREMENTS OF THE LABUAN INSURANCE BROKING COMPANY

  • A minimum paid-up capital unimpaired by losses of RM300,000 or its equivalent in any foreign currency or a net working fund of at least RM300,000. The working capital is to be maintained in an account with a bank in Labuan.
  • Must have a professional indemnity insurance coverage of not less than RM2.5 million or its equivalent in any foreign currency or such other higher amount as may be specified and shall remain indemnified under such policy throughout its operation in Labuan.
  • The person in control or director or principal officer of the Labuan insurance broking company must be a fit and proper person. It must maintain at least two (2) directors.
  • The Labuan insurance broking company must maintain a registered office in Labuan and have at least one resident secretary.
  • A Labuan insurance broking company can appoint a licensed Labuan insurance manager to handle its administration functions and work with the insurance manager to meet its requirements of a management office in Labuan and minimum 4 (four) full time employees in Labuan.
  • The Labuan insurance broker can establish a marketing office in Kuala Lumpur and/or Johor Bahru or co-located office in Malaysia.
  • A Labuan insurance broker can handle the reinsurance of domestic insurance business, including the reinsurance of domestic business transacted in Ringgit Malaysia.
  • A Labuan insurance broker can choose the principal currency in which they will operate and maintain in the accounting records.

 

LABUAN IBFC TAXATION SYSTEM

    1. Labuan Business Activity Tax Act 1990 (“LBATA”) governs the imposition, assessment and collection of tax on a Labuan business activity carried on in, from or through Labuan.
    2. Labuan entities that carry on a non-Labuan business activity are subject to the provisions of the Malaysian Income Tax Act, 1967 (ITA).
    3. “Labuan business activity” means:
    • a Labuan trading or a Labuan non-trading activity carried on in, from or through Labuan,
    • excluding any activity which is an offence under any written law.
    1. “Labuan trading activity” includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity. The Labuan entity shall pay 3% of net profits as per audited accounts.
    2. “Labuan non-trading activity” means an activity relating to the holding of investments in securities, stock, shares, loans, deposits or any other properties by a Labuan entity on its own behalf. Such activity is not subject to tax under LBATA.
    3. Labuan companies carrying on both Labuan trading and non-trading activities will be deemed to be carrying on Labuan trading activities. Hence, it will have the same tax treatment as those undertaking Labuan trading activity mentioned above.
    4. Substance requirements under Labuan Business Activity Tax Regulations 2018:
    • To benefit under LBATA, a Labuan captive will need to comply with the substance requirements of minimum number of four (4) full time employees in Labuan and an annual operating expenditure in Labuan of RM100,000.

 

DEALINGS WITH RESIDENT

All Labuan entities are allowed to conduct transactions with residents of Malaysia in Ringgit Malaysia. “Resident” here means:

  • in relation to a natural person, a citizen or permanent resident of Malaysia; or
  • in relation  to any other person, a person who has established a place of business, and is operating in Malaysia.
  • and includes person who is declared to be a resident pursuant to s.43 of the Malaysian Exchange Control Act 1953.

The amount of deductions allowed in respect of payments made by Residents to Labuan entities are as follows:-

>  Interest expense67% deductible
>  Lease rental67% deductible
>  General reinsurance premiums100% deductible
>  Other type of payments3% deductible

 

LABUAN INSURANCE BROKER LICENCE FEE

License processing fee
RM1,000 (once-off)

Annual license fee
RM20,000
The annual license fee is payable when the license is approved by Labuan FSA and remains valid until 31 December of the year of approval. Subsequent annual license fee is payable on or before 15 January of each calendar year