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Labuan International Business and Financial Centre (Labuan IBFC) has emerged as a premier hub for asset leasing in Asia, offering companies a cost-efficient and flexible regulatory framework for leasing activities. The leasing sector in Labuan has grown steadily, catering to industries such as aviation, maritime, oil and gas, and more. Companies benefit from the jurisdiction’s strategic location, tax incentives, and access to global markets, making Labuan IBFC an ideal destination for setting up leasing structures.
Why Choose Labuan IBFC for Asset Leasing?
Why Choose Labuan IBFC for Asset Leasing?
Competitive Tax Regime:
Labuan IBFC offers one of the most attractive tax environments for asset leasing. Leasing companies licensed under Labuan IBFC can enjoy a 3% tax rate on audited net profits, providing a highly tax-efficient structure for asset leasing transactions.No Withholding Tax on Payments:
Companies conducting leasing activities in Labuan IBFC benefit from the absence of withholding tax on dividends, interest, royalties, and technical fees paid out of Labuan. Additionally, lease payments made by Malaysian companies to a Labuan leasing company are not subject to withholding tax.Double Taxation Agreements (DTAs):
Labuan IBFC has access to Malaysia's network of over 70 Double Taxation Agreements (DTAs), which can help mitigate foreign withholding taxes on leasing income and enhance tax efficiency.Wide Range of Leasing Structures:
Labuan offers flexibility in how leasing companies can be structured. Companies may choose to set up pure leasing entities, special purpose vehicles (SPVs), or use Protected Cell Companies (PCCs) to manage various leasing arrangements, particularly when assets need to be ring-fenced.Shariah-Compliant Options:
For companies seeking Shariah-compliant leasing solutions, Labuan IBFC provides Ijarah structures as part of its Islamic finance offerings, making it the only jurisdiction in Asia to offer comprehensive Islamic leasing services.
Benefits of Setting Up a Leasing Structure in Labuan IBFC
Benefits of Setting Up a Leasing Structure in Labuan IBFC
Efficient Cost Management:
Labuan IBFC’s business-friendly regulatory environment allows companies to effectively manage costs, making it easier for businesses to maintain compliance while optimizing operational expenses.Tax-Deductible Lease Rentals:
Malaysian companies paying lease rentals to a Labuan leasing company can claim a tax deduction on up to 75% of the lease rental, increasing overall savings.Access to a Strategic Location:
Labuan IBFC’s proximity to major Asian markets and its inclusion in the ASEAN Economic Community (AEC) make it a gateway for companies looking to expand into the broader Asia-Pacific region.
Example of Leasing Structures
Example of Leasing Structures
Figure 1: Example of a general Leasing Structure
Labuan leasing companies can be structured in various ways to optimize tax benefits and regulatory compliance. An example includes aircraft financing, where a Labuan SPV (special purpose vehicle) is created to lease an aircraft to an airline. The SPV, financed through loans, leases the aircraft to the airline, creating a tax-efficient solution for financing and operating the aircraft.
Figure 2: Example of Aircraft Financing via Leasing Structure
Conclusion
Conclusion
Labuan IBFC provides a robust and attractive environment for companies looking to establish leasing structures. With its competitive tax regime, access to Malaysia’s DTAs, and flexible leasing options, Labuan IBFC stands out as a key leasing hub in Asia. Whether you are leasing aircraft, ships, or other capital equipment, Labuan IBFC offers the right tools to maximize profitability and efficiency.
Contact DingerCo today for expert assistance in setting up your asset leasing structure in Labuan IBFC. We’ll guide you through the entire process, from licensing to compliance, to ensure your leasing company thrives in this premier financial hub.
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