SHIPPING OPERATIONS VIA LABUAN INTERNATIONAL BUSINESS FINANCIAL CENTRE ( IBFC ) AND MALAYSIA INTERNATIONAL SHIP REGISTRY

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SHIPPING OPERATIONS VIA LABUAN INTERNATIONAL BUSINESS FINANCIAL CENTRE ( IBFC ) AND MALAYSIA INTERNATIONAL SHIP REGISTRY Shipping operations means transportation of passengers or cargo by sea or the

1 SHIPPING OPERATIONS VIA LABUAN INTERNATIONAL BUSINESS FINANCIAL CENTRE ( IBFC ) AND MALAYSIA INTERNATIONAL SHIP REGISTRY Shipping operations means transportation of passengers or cargo by sea or the letting out on a charter of ships on a voyage or time charter basis. To qualify as Labuan trading activity under the Labuan Business Activity Tax Act 1990 ( LBATA ), the shipping operations by a Labuan entity; must be carried out in Labuan or outside Malaysia; deals with non-resident or with another Labuan entity; and in a currency other than Malaysian currency Resident in the above context means: (a) a citizen or a permanent resident of Malaysia; or (b) a person who has established a place of business, and is operating, in Malaysia Kensington Trust Labuan Limited is a licensed trust company in Labuan and is able to assist with the establishment and administration of your Labuan company and also, registration with MISR. A. Registration of international ships in Labuan Malaysia International Ship Registry ( MISR ) is a body for the registering of international ships. The MISR has been established to encourage individual and foreign shipping companies to register their ships in Malaysia without having to comply with the requirement of Malaysian majority shareholder. The MISR would enable the placing of Malaysia on the international maritime map. Port of Registry for Malaysia International Ships Labuan Eligibility Registrar General may register a ship as a Malaysian International Ship, if it is owned by a corporation that satisfies the following requirements: Incorporated in Malaysia To qualify under LBATA, the shipping company must be incorporated or registered under the Labuan Companies Act 1990.

2 An office established in Malaysia Ownership : Foreigners are allowed to hold 100% equity in line with the government's effort to encourage foreign investments in the country Paid-up capital of corporate ownership : The corporation must have a minimum paid-up capital of 10% of the value of the ship or RM1million, whichever is higher. The above requirement shall apply only to the first ship registered by the corporation. Appointment of Ship Manager The owner of a ship shall, before applying for a ship to be registered, appoint a ship manager whom shall be: A Malaysian citizen having his permanent residence in Malaysia; or A company incorporated in Malaysia and having its principal place of business in Malaysia Vessel Age and Survey Requirements Fitted with mechanical means of propulsion Not less than 1,600 gross tonnage; and Vessel age: <15 years for tanker and bulk carrier <20 years for others Marine surveys are conducted by Ships Surveyor working under the direction of the Surveyor-General who may also authorised classification societies to conduct survey on his behalf. Application for Vessel Name An application in writing should be submitted to the Registrar of Ships for the vessel's name at least 14 weeks in advance before the date at which the vessel is supposed to be registered. Three (3) names may be submitted for approval. If the proposed name is approved, a Certificate of Approval Name will be issued by the Registrar of Ships and the approval is valid for a period of twelve (12) months. Provisional Registration Process Vessels are generally first registered on a provisional basis by the Registrar of Ships. The following documents must be presented for provisional registration of the vessel :- Application Form Certificate of Approved Name Provisional Certificate of Survey (COS) issued by Ships Surveyor of Malaysia Statutory declaration of ownership must include the following details : Name of the ship and its existing tonnage Statement of the date when and place where the vessel was built, or if the date and place of building are not known, a statement that the declarant does not know the date and place of the building of the ship

3 Statement as to the owner of the ship and the citizenship of such owner, and if the vessel is owned by more than one person, the number of shares each is entitled Statement of the name of the master of the vessel and his citizenship Statement that no other person (other than those declared) is entitled as owner of any legal or beneficial interest in the ship or any share thereof Except where the operator and the owner of the ship are the same person, the name and citizenship of the operator of the ship; and Declaration that the particulars stated in the form are true to the best of his knowledge and belief If applicant is corporation : Certified true copy of Memorandum and Articles of Association and Certificate of Incorporation Certification under common seal that the majority shareholding including voting share of the corporation is held by Malaysian citizens free from trust or obligations in favor of non-malaysian; and Authority Form - appointing the public officer authorized to make declaration on behalf of the owner Upon due acceptance of the above documents, the Registrar of Ships will allocate an official number to the vessel. The certificate of Provisional Registry is valid for a maximum period of one (1) year from the date of issuance. Permanent Registration Process The following documents must be presented to the Registrar of Ships for permanent registration of the vessel: Application Letter Builder's Certificate or Deletion Certificate Original Bill of Sale duly authenticated Certified Ships Carving and Marking Note Permanent Certificate of Survey (COS) issued by Ships Surveyor of Malaysia; and If applicable, certification from Customs Department that import duty has been paid B. Favourable Labuan Tax Structure Tax on Labuan trading activities upon election annually :- 3% of net profits as per audited accounts; OR RM20,000/- Withholding tax exemption on payments made to non-residents :- Dividend Interest No stamp duty on all instruments relating to offshore business activities including share transfer No import duty / sales tax / capital gain tax No foreign exchange controls No capital gain tax / inheritance tax Strategically situated in the Asia Pacific region and sharing a common time zone with many large Asian cities

4 Double Tax Agreements between Malaysia and over 70 countries 50% tax abatement for expatriate professionals and managers employed under Labuan companies 100% exemption for director s fees received by non-citizen directors of Labuan companies C. Features of Labuan Company All Labuan companies are governed by the Labuan Companies Act 1990 and this Act requires the engagement of services of a Labuan IBFC registered trust company to act as its incorporation agent. Share Capital Permitted Currencies Standard currency Minimum issued capital Any foreign currency except Ringgit Malaysia US$ One (1) in any denomination in foreign currency However, for company to be registered with MISR, the minimum paid-up capital is 10% of the value of the ship or RM1million, whichever is higher. This requirement shall apply only to the first ship registered by the company. Authorised capital N/A Par / Nominal value N/A Directors Corporate directors Allowed Local directors requirements Optional Location of meeting Anywhere Minimum numbers of meeting Per Articles of Association Shareholders Bearer shares No Corporate shareholders Allowed Local shareholders requirements No Location of meeting Anywhere Minimum numbers of meeting One (1) annually Company Secretary Requirements A resident secretary who must be a Trust Officer of a trust company OR a Labuan / Malaysian domestic company whollyowned by the Labuan trust company Registered Office Requirements Principal office of a trust company in Labuan Accounts Records Kept in Labuan Preparation of accounts Yes Audit requirements and filing Optional, but required for Labuan companies opting to pay tax at 3% p.a. on the audited net profits and also, licensed companies

5 Annual Requirements Annual Return Annual Government Fee Tax Filing Taxation Trading activities Non-trading activities Trading and Non-trading activities Others General Legal System Corporate Redomiciliation Not later than 30 days from the anniversary date of incorporation of the Labuan company On or before the anniversary date of incorporation of the Labuan company Annual tax return needs to be filed with the Malaysian Director General of Inland Revenue by 31 March of that year of assessment. Normally, an extension of time for filing is allowed by the Inland Revenue. RM20,000/- OR 3% of net audited profits Nil RM20,000/- OR 3% of net audited profits No withholding tax, no capital gain tax, no stamp duty on offshore instruments Common Law Yes For more details, please contact us at The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.

LABUAN IBFC ASIA PACIFIC S LEADING MIDSHORE INTERNATIONAL BUSINESS AND FINANCIAL CENTRE

LABUAN IBFC ASIA PACIFIC S LEADING MIDSHORE INTERNATIONAL BUSINESS AND FINANCIAL CENTRE IBFC, located in Malaysia is strategically located in the heart of the Asia Pacific region, sharing a common time