Labuan GIFT Programme for International Commodity Trading
GIFT Programme provides tax rate of 3% on qualifying income to increase its competitiveness as a centre for international trading companies.
Background
The Global Incentives for Trading (GIFT) Programme is tax incentives to encourage the traders to use Malaysia as an
international base for specified types of commodities to be conducted on in, from or through Labuan, Malaysia.
Global Incentives For Trading (GIFT) Programme
Eligibility Entities
- Labuan Entities licensed as a Labuan International Commodity Trading Company (LITC).
- Traditional commodities such as petroleum and petroleum-related products. The
specified trading of physical products and related derivative are as follows:-
- Petroleum and petroleum-related products (including liquefied natural gas (LNG);
- Mineral;
- Agricultural products;
- Refined raw materials;
- Chemicals;
- Base minerals; and
- Coal.
Incentive Commitment
- Minimum annual turnover of USD 50 million;
- Substantial Activity Requirements for Labuan International Commodity Trading Company (LITC) under the GIFT Programme :-
| Labuan Entities | Annual operating expenditures |
|---|---|
Labuan International
Commodity Trading
Company.
|
RM3,000,000 (USD 750,000) per entity in Malaysia
(including minimum of RM100,000 (USD 25,000) in
Labuan). RM3,000,000 (USD 750,000) per entity in Malaysia (including minimum of RM100,000 (USD 25,000) in Labuan). Local business spending including:
|
| Labuan Entities | Minimum number of full time employees in Labuan |
|---|---|
Labuan International
Commodity Trading
Company.
|
2 staff per group. Increase of 1 employee for every additional 5 LITC companies. |
c. To employ at least three (3) professional traders who are tax residents of Malaysia.
Operational Requirements
LITC to have the following functions (but not limited to) in Malaysia:
- Strategic management;
- Banking;
- Finance and treasury management;
- Risk management;
- Market research and product portfolio development;
- Logistics management;
- Global procurement;
- Marketing and sales planning.
Location for consideration
Operating and/or marketing office can be based anywhere in Malaysia.
Incentives
- 3% on audited chargeable profits;
- 100% tax exemption on director fees paid to a non-Malaysian director;
- 50% tax exemption on gross employment income of non-Malaysian professional, managerial including traders with LITC;
- Tax exemption on dividends received by or paid from the LITC;
- Tax exemption on royalties received from the LITC;
- Tax exemption on interest received by residents or non-residents from the LITC;
- Stamp duty exemption on all instruments for Labuan business activities, M&A of Labuan entities and transfer of shares;
- No sales tax and service tax;
- The non-deductability rules under P.U (A) 375/2018 dated 31st December 2018 is not applicable to transactions between LITC and Malaysian resident (subject to fulfillment of the tax substantial activity requirements).
Setting up LITC Company
- Apply licence with Labuan FSA*
- Approval from Labuan FSA* obtained
- Incorporation of LITC
- Commence business
Comparision Between Labuan Gift Programme Vs Singapore Global Trader (GTP) Programme
GIFT (MALAYSIA)
GTP (SINGAPORE)
Incentives
3% on audited net profit. No
renewal is required, provided
that the Substances
Regulations for LITC are met.
Reduced corporate rate of 5% – 10% on
qualifying trading income for renewable
period three (3) to five (5) years.
Qualifying commodities and
products:-
- Petroleum and petroleum related products, including liquefied natural gas (LNG);
- Mineral;
- Agricultural products;
- Refined raw materials;
- Chemicals;
- Base minerals; and
- Coal.
- Electronic and electrical products;
- Consumer products;
- Building and Industrial materials;
- Industrials products;
- Energy commodities and products;
- Agricultural commodities and bulk edible products;
- Minerals;
- Machinery components
Physical trade that qualify under GTP:
- Trans-Shipment Trade;
- Offshore Trade;
- Re-Export Trade (only the non- value added portion of the trades qualify).
Business transactions
Allowed to have transactions
with Malaysians for petroleum
and petroleum-related
products.
Transactions are only those with offshore
parties or other GTP companies.
Operation cost
Lower cost of operation,
wages and rental.
High cost of operation, wages and rental.
Location
All States in Malaysia,
including Iskandar Malaysia
Singapore
Requirements
- Minimum annual turnover of USD50 million;
- Annual operating expenditures of RM3 million (USD 750,000) payable to Malaysian residents in Ringgit Malaysia;
- Minimum 3 professional traders who are tax residents in Malaysia.
- Minimum annual turnover of USD100 million;
- Minimum local expenditure of SGD $3million (USD 2.3million); and
- Minimum 3 trading professional employed which involved in one of the following sectors: risk management, procurement/sourcing or sales and marketing.
Who can apply
Any person who intend to
establish a Labuan entity to
undertake international
commodity trading business.
Well-established players engaged in
international physical trading on principal
basis and have substantial operations in
Singapore and meet stringent quantitative
criteria, including employment and local
expenditure.
