This content is from: Local Insights
Malaysia: Pushing for Labuan mutual funds
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| Andri Aidham Badri | Putri Norlisa Mohd Najib |
The issuance of the revised Guidelines emphasises the continued commitment by the LFSA to encourage the establishment of Labuan-based mutual funds.
The revised Guidelines seek to clarify and expand on the previous guidelines as to the application procedures, operational and regulatory requirements of conventional and Islamic Labuan mutual funds (for instance, contents of information memorandum and the approval procedure). By having this more comprehensive framework in place, Labuan is positioned to offer itself as a viable option for international investors that are keen to take advantage of such benefits including:
- tax: (i) A Labuan mutual fund carrying out trading activity has the option of either paying a flat tax rate of RM20,000 ($6,000) or three percent of audited net profit, whilst a non-trading Labuan mutual fund is exempt from tax; (ii) there is no withholding tax for any income distribution to the investors of the Labuan mutual fund; and
- flexible structure: an applicant considering setting up a mutual fund in Labuan has the option of using several different vehicles such as a Labuan company, a corporation under the laws of any recognised country or jurisdiction who is a member of the International Organisation of Securities Commission, a partnership, a protected cell company, a foundation or a unit trust.
Although the number of mutual funds in Labuan according to the Labuan IBFC (International Business and Financial Centre) is at a modest level, it is expected that as the process becomes more familiar, interest in opting for a Labuan-based mutual fund will rise.
Andri Aidham Badri and Putri Norlisa Mohd Najib