Labuan International Commodity Trading Company
The Global Incentives for Trading (GIFT) programme is a framework of incentives for traders of specified commodities to use Malaysia as their international trading base to undertake international commodity trading business in Labuan IBFC. The international commodity trading business under the GIFT programme is the trading of physical and related derivative instruments of
- Petroleum and petroleum-related products including liquefied natural gas (LNG);
- Agriculture products;
- Refined raw materials;
- Chemicals; and
- Base minerals,
with non-residents in any currency other than Ringgit.
Under the GIFT programme, a Labuan International Commodity Trading Company (LITC) must be established and licensed by the Labuan Financial Services Authority (Labuan FSA). An annual licence fee amounting to RM40,000 is payable to Labuan FSA upon the grant of licence. The LITC is allowed to establish its operational office(s) anywhere in Malaysia.
A LITC is required to meet the following criteria after five (5) years from the date of license:
- Minimum annual turnover of USD100 million;
- Minimum annual business spending of RM3 million payable to Malaysian residents; and
- To employ at least three professional traders with a minimum salary of RM15,000 per month each and being resident of Malaysia in a calendar year for a year of assessment under the Income Tax Act 1967.
LITCs will be subject to a corporate tax rate of 3% of chargeable profits as reflected in the audited accounts under the Labuan Business Activity Tax Act 1990 as per the relevant exemption order. Further, a LITC set up purely as an LNG trading company would be entitled to a 100% income tax exemption on chargeable profit for the first three (3) years of its operation provided the company is licensed before 31 December 2014. Thereafter, the LITC will be subject to the abovementioned 3% corporate tax rate.
There are other tax exemptions for LITCs as follows:
- 100% exemption on director fees paid to non-Malaysian director of the LITC.
- 50% exemption on gross employment income of Non-Malaysian professional, managerial staff including traders with the LITC.
- Exemption on dividends received by or from the LITC.
- Exemption on royalties received from the LITC.
- Exemption on interest received by resident or non-resident from the LITC.
- Stamp duty exemption on all instruments for Labuan business activities, M & A of Labuan company and transfer of shares.
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