Labuan Intl Commodity Trading Company

On 8 March 2018, the Labuan Financial Services Authority (“Labuan FSA”) issued a new Guidelines on the establishment of Labuan International Commodity Trading Company (“LITC”) under the Global Incentives for Trading (“GIFT”) programme setting out the parameters relating to the establishment and operation of the LITC. This new Guidelines comes into effect on 1 October 2018.

 

APPLICATION FOR LICENSE

Any person intending to undertake Labuan international commodity trading business under the GIFT programme may submit an application to Labuan FSA. Upon receiving approval from the Labuan FSA, the applicant is required to establish a LITC.

Kensington Trust Labuan Limited is a licensed trust company in Labuan and may assist you with –

  • application for LITC
  • establishment and administration of your LITC 

 

GLOBAL INCENTIVES FOR TRADING PROGRAMME

The GIFT programme is a framework of incentives for traders that are undertaking the trading of physical products and related derivatives in petroleum and petroleum-related products (Petroleum(1)) including liquefied natural gas (LNG) and use Malaysia as their international trading base to undertake international commodity trading business in Labuan IBFC.

(1) The term “Petroleum” shall constitute both Petroleum and Petroleum-Related products unless specified otherwise.

In setting Malaysia as its trading base, LITC is expected to have some or all of the following functions in Malaysia:-

  • Strategic management;
  • Banking, finance and treasury management;
  • Risk management;
  • Market research and product portfolio development;
  • Logistics management;
  • Global procurement; or
  • Marketing and sales planning.

 

OPERATIONAL REQUIREMENTS

  • Sufficient capital or working funds that commensurate with its operations and activities.
  • Establish its operational office, which can be anywhere in Malaysia.
  • Business is conducted with both corporate governance and risk management frameworks in place.
  • Principal Officer, Director(s) and Officer(s) responsible for the management of the company are fit and proper persons.

 

POST-LICENSING REQUIREMENTS

LITC must comply with the following conditions after the granting of its licence and commencement of its business:

  • Achieve minimum annual turnover of USD50 million;
  • Incur minimum annual business spending of RM3 million payable to Malaysian residents in Malaysian Ringgit; and
  • Employ at least three professional traders that fulfil the following requirements:-
  1. Principal officer or any person performing a senior management function.
  2. These professional traders shall be involved in any one of the following areas:
    - Trading;
    - Risk Management;
    - Procurement; or
    - Sales & Marketing.
  3. These professional traders shall be residents of Malaysia in a calendar year for the year of assessment under the Income Tax Act 1967 (ITA).

 

SUBMISSION TO LABUAN FSA

  • Annual update submission form latest by 15 January of each year; and
  • A copy of its audited financial statements within six (6) months after the close of each financial year.

 

FEES TO LABUAN FSA

  • License processing fee: RM1,000 (one-off)
  • Annual license fee: RM40,000. 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 payment of annual fee is payable not later than 15 January of every year.

 

ATTRACTIONS OF GIFT PROGRAMME

  • Corporate tax rate of 3% of audited chargeable profits
  • 100% tax exemption on director fees for non-Malaysian directors
  • 50% tax exemption on gross employment income of non-Malaysian professional and managerial staff
  • Stamp duty exemption on all instruments for Labuan business activities
  • Tax exemption on dividends received by or from the LITC
  • Tax exemption on royalties received from the LITC
  • Tax exemption on interest received by resident or non-resident from the LITC
  • Operational cost in Malaysia is substantially lower than in other commodities hubs across the world
  • World class storage facilities in Malaysia