(File pix) The Labuan International Business and Financial Centre (Labuan IBFC)'s physical location and accessibility makes it an ideal centre for Asian-based companies to establish their presence in order to conform to new "financial normals", namely; the Common Reporting Standard (CRS) and Base Erosion Shifting (BEPS). Pix from IBFC website

KUALA LUMPUR: The Labuan International Business and Financial Centre (Labuan IBFC)'s physical location and accessibility makes it an ideal centre for Asian-based companies to establish their presence in order to conform to new "financial normals", namely; the Common Reporting Standard (CRS) and Base Erosion Shifting (BEPS).

"The requirements for transparency and the need to conform to initiatives such as CRS and BEPS will be the new normal for all financial centres. For Labuan IBFC, the need to conform to the international regulatory requirements has always been the key to our principles and aims for ensuring the jurisdiction itself," said Labuan IBFC Inc Sdn Bhd's chief executive officer Danial Mah Abdullah.

"We believe that as businesses adopt the new normal higher transparency requirements, it would be natural for them to consider establishing substance in a well-regulated and cost-efficient jurisdiction to facilitate cross-border transactions and investments, including re-domiciling their businesses. Labuan IBFC's physical location and accessibility, therefore, make it ideal for Asian-based companies for such purposes," he said.

BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations, where there is little or no economic activity.

BEPS is of major significance for developing countries, due to their heavy reliance on corporate income tax, particularly from multinational enterprises.

Malaysia had in Jan become the 94th jurisdiction to join the Inclusive Framework on BEPS.

Designed by the Organisation for Economic Co-operation and Development (OECD) and G20 countries in the 2015 BEPS project, the framework encompasses a group of countries that have pledged to implement measures aimed at preventing tax avoidance.

The commitment to the framework means that Malaysia has agreed to adopt BEPS’ "minimum standards” on tax treaty shopping; implementing country-by-country reporting for transfer pricing; limiting benefits of any intellectual property or other preferential tax regimes; and fully implement the mutual agreement procedure in its tax treaties.

In return, Malaysia will be permitted to work alongside OECD and G20 countries on an equal footing to ensure widespread adoption of the BEPS minimum standards, which will be subject to a peer review process; participate in some remaining BEPS project international tax standard setting work; participate in ongoing data gathering on the tax challenges of the digital economy; and work on measuring the impact of BEPS.

"It is natural that these new requirements on transparency have created much apprehension out there for Malaysian taxpayers, particularly high net worth individuals," said Mah.

"But I believe that the changes (for) cross-border investment and trade (were made to ensure) greater transparency, (and) is potentially a key business enabler for Labuan IBFC for its next stage of evolution," he added.

Labuan IBFC is a midshore financial centre that caters to both corporate and private clients with a wide range of solutions and services, such as private foundation for wealth management; limited liability partnerships, company incorporations and Labuan International Trading Companies (LITCs) for commodities trading businesses.

There are over 13,000 companies incorporated in Labuan IBFC as of Dec 2016, which represents an increase of 6.4 per cent year-on-year.