Leasing

Labuan leasing is defined as the business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer, regardless whether the letting is with or without an option to purchase the property, including charters of ships.

Property includes any plant, machinery, equipment or other chattel attached or to be attached to the earth, and charters of ships means bareboat charters only and does not include the transportation of passengers, cargo by sea or the charter of ships on a voyage or time charter basis.

Leasing businesses could be transacted via conventional means or in accordance with Shariah principles.

 

Application Requirement

An applicant is required to submit an application of which the submission should include the following:

  1. A business plan detailing the operations of the applicant and the nature of the leasing transactions, including whether they would be conducted with residents or non-residents
  2. Group corporate shareholding structure
  3. Diagram of leasing transaction
  4. The composition of the board of directors for the proposed leasing company; and
  5. Any other information that may be relevant to the application.

 

Operational Requirement

The Authority revised the Guidelines for leasing business on 29 December 2017, to ensure Labuan IBFC remains relevant and complies with Organisation for Economic Co-operation and Development (OECD)’s Based Erosion Profit Shifting (BEPS).

Substance Requirement:

  1. Physical presence: Maintain an operational office in Labuan. The operational office should be used for business purposes only and must be appropriately furnished with office equipments;
  2. Key leasing activities: The core income generating activities are expected to be carried out from the Labuan office. Typically, the activities may include identifying and acquiring of assets to be leased, negotiating leasing terms, soliciting lessees, management of leased assets and financing the acquisition of assets
  3. Employment: Have adequate number of full-time employees with necessary qualification, skills or experiences in the relevant fields related to the leasing business; and
  4. Annual business spending: Have incurred adequate business spending in Malaysia including Labuan in undertaking the Labuan leasing business3.

 

Overview of Other Requirements:

  1. Have sufficient and positive capital or working funds which commensurates with the Labuan leasing business at all times.
  2. Ensure that the directors and officers responsible for the management of the company meet the Fit and Proper Person requirements
  3. Establish an adequate set of internal policies and controls for its operations, compliances, corporate governance and risk management.
  4. Ensure that all its leased assets are adequately insured.
  5. Maintain adequate and proper records and books of accounts in Labuan.
  6. Ensure that all leasing transactions with any of its related party are conducted at arm’s length basis and are subjected to the transfer pricing rules and guidelines issued by the relevant authorities.
  7. Obtain prior approval from Labuan FSA for:
    • each new and subsequent leasing transactions. In this regard, no leasing transaction shall be undertaken prior to Labuan FSA’s approval;
    • establishment of office outside Labuan and establishment or acquisition of subsidiary;
    • change of lessee and leased asset;
    • change of shareholders of more than ten per centum; and
    • appointment of directors.
  8. Notify Labuan FSA within 30 days pertaining to the following matters:
    • resignation of directors;
    • any change of information with regard to the place of business or office in Labuan;
    • any changes to the constituent documents and business plan which is not tantamount to the change of lessee and leased asset. This may include the change of its company name; and
    • termination / extension of any leasing transactions.

 

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