NEWS

 

TITLE: Statutory Orders Published at E-Federal Gazette Portal, Labuan Financial Services Authority Circular on Addition to the Revised Substance Regulations, Labuan Investment Committee – LIC Pronouncement 3-2020

DATE: 23/03/2020

23 March 2020 Circular No. 24/2020
TO ALL ACCOUNTANTS
1. STATUTORY ORDERS PUBLISHED AT E-FEDERAL GAZETTE PORTAL
The statutory orders pertaining to Customs Act 1967, Excise Act 1976 and Free Zones Act 1990 have been published at the e-Federal Gazette Portal recently. The summary of the said statutory orders are as follows:
Statutory order Summary of details Commencement date
P.U.(A) 83/2020 – Customs (Compounding of Offences) Regulations 2020


P.U.(A) 82/2020 – Excise (Compounding of Offences) Regulations 2020


P.U.(A) 81/2020 – Free Zones (Compounding of Offences) Regulations 2020
The offences specified in the First Schedule are prescribed to be compoundable offences and may be compounded with the written consent of the Public Prosecutor.

An offer to compound an offence is for a period of 14 days or such extended time as the Director General may grant. A prosecution may be instituted if no payment made during the above specified time.
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P.U.(A) 71/2020 – Customs (Prohibition of Exports) (Amendment) Order 2020 The Second Schedule of P.U.(A) 102/2017 is amended by inserting the item no. 23 (Hydrofluorocarbons gas) and the item no. 24 (containing perfluorocarbons or hydrofluorocarbons but not containing chlorofluorocarbons or hydrochlorofluorocarbons This order came into operation on 1 March 2020
P.U.(A) 70/2020 – Customs (Prohibition of Imports) (Amendment) Order 2020 Part II of the Second Schedule of P.U.(A) 103/2017 is amended by inserting the item no. 19 (Hydrofluorocarbons gas) and the item no. 20 (containing perfluorocarbons or hydrofluorocarbons but not containing chlorofluocarbons or hydrochlorofluorocarbons. This order came into operation on 1 March 2020
P.U.(A) 69/2020 – Customs Duties (Goods under the Framework Agreement on Comprehensive Economic Co-Operation between ASEAN and China) (Amendment) Order 2020   The particulars of the following subheadings stated in the Second Schedule of P.U.(A) 212/2019 are substituted or deleted:

i) 2903.39.90 00 (substituted)
ii) 2903.79.00 22 and 2903.79.00 30 (deleted)
iii) 3824.78.00 00 (substituted)
This order came into operation on 1 March 2020
P.U.(A) 68/2020 – Customs Duties (Goods under The Agreement Establishing The ASEAN-Australia-New Zealand Free Trade Area) (Amendment) Order 2020   The particulars of the following subheadings stated in the Second Schedule of P.U.(A) 266/2019 are substituted or deleted:

i) 2903.39.90 00 (substituted)
ii) 2903.79.00 22 and 2903.79.00 30 (deleted)
iii) 3824.78.00 00 (substituted)  
This order came into operation on 1 March 2020  
P.U.(A) 67/2020 – Customs Duties (Goods under Agreement Establishing The ASEAN-Hong Kong, China Free Trade Area) (No 2) (Amendment) Order 2020 The particulars of the following subheadings stated in the Second Schedule of P.U.(A) 279/2019 are substituted or deleted:

i) 2903.39.90 00 (substituted)
ii) 2903.79.00 22 and 2903.79.00 30 (deleted)
iii) 3824.78.00 00 (substituted)
This order came into operation on 1 March 2020
P.U.(A) 66/2020 – Customs Duties (Goods of ASEAN Countries Origin) (ASEAN Harmonised) Tariff Nomenclature and ASEAN Trade in Goods Agreement) (Amendment) Order 2020 The particulars of the following subheadings stated in the Second Schedule of P.U.(A) 100/2017 are substituted or deleted:

i) 2903.39.90 00 (substituted)
ii) 2903.79.00 22 and 2903.79.00 30 (deleted)
iii) 3824.78.00 00 (substituted)
This order came into operation on 1 March 2020
P.U.(A) 65/2020 – Customs Duties (Amendment) Order 2020 The particulars of the following subheadings stated in the First Schedule of P.U.(A) 5/2017 are substituted or deleted:

i) 2903.39.90 00 (substituted)
ii) 2903.79.00 22 and 2903.79.00 30 (deleted)
iii) 3824.78.00 00 (substituted)
This order came into operation on 1 March 2020
The details of the said statutory orders can be downloaded at the link below:
  http://www.federalgazette.agc.gov.my/outputp/pua_20200303_PUA83_2020.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200303_PUA82.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200303_PUA81_2020.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200226_PUA71.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200226_PUA70.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200226_PUA69.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200226_PUA68.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200226_PUA67.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200226_PUA66.pdf
http://www.federalgazette.agc.gov.my/outputp/pua_20200226_PUA65.pdf
2. LABUAN FINANCIAL SERVICES AUTHORITY’S CIRCULAR ON ADDITION TO THE REVISED SUBSTANCE REGULATIONS
  Further to the issuance of Circular No 109/2019 - Circular on Labuan Investment Committee (LIC) Pronouncement 2 – 2019, the Labuan Financial Services Authority (Labuan FSA) provided clarification on LIC Pronouncement 2 through Circular 213/2019/ALL dated 20 December 2020. Circular 213/2019/ALL states the changes to the substantial activity requirements for certain Labuan entities that have been approved by the Ministry of Finance.
  In addition, Labuan FSA has also uploaded Circular 233/2020/ALL dated 20 January 2020 pertaining to the additional business activity i.e. other trading entity. The said “other trading entity” is Labuan entity that carries out administrative, accounting and legal services including backroom processing, payroll services, talent management, agency services, insolvency related services and management service.
  The effective date of the above-mentioned changes is 1 January 2019 and subject to the final gazetted regulations on amendments to P.U.(A) 392 - Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018.
Please download the enclosures to this Circular for more details of Circulars 213/2019/ALL and 233/2020/ALL. P.U.(A) 392/2018 and the said circulars are also available at the links below:
  http://www.federalgazette.agc.gov.my/outputp/pua_20190101_PUA%20392.pdf
  https://www.labuanibfc.com/clients/Labuan_IBFC_78C2FF81-703A-4CAA-8926-A348A3C91057/contentms/img/Downloads/guideline/general/2019/Clarification%20to%20LIC%202-2019.pdf?1584951989
  https://www.labuanibfc.com/clients/Labuan_IBFC_78C2FF81-703A-4CAA-8926-A348A3C91057/contentms/img/Downloads/guideline/general/Addition%20to%20the%20Revised%20Substance%20Regulation.pdf?1584951989
   
3. LABUAN INVESTMENT COMMITTEE – LIC PRONOUNCEMENT 3-2020
On 21 February 2020, the Labuan Investment Committee (LIC) held a meeting to deliberate various implementation issues arising from the new Labuan tax regime including the proposal that were presented by the Association of Labuan Trust Companies at the said LIC meeting.
  The LIC has clarified on the following matters:
1) Substance requirement for pure equity holding entity who receives interest income arising from placement of dividend monies or proceeds from disposal of shares
 
Labuan entity Interest income Status of Labuan entity Type of holding company
Is a pure equity holding entity Receipt from placing of dividend monies or proceeds from disposal of shares, in financial institutions which do not constitute as “commercial activity” Be regarded as a pure equity holding activity Two categories:

1) Companies that hold a variety of assets and earn different types of income (e.g. interest, rents and royalties)
2) Companies that hold equity participations and earn only dividends and capital gains
  In this regard, a Labuan entity under the above first category that receives only non-dividend income from the holding of investments such as bonds, sukuk, debt instruments, properties, securities or etc., the said Labuan entity is deemed to be undertaking non-pure equity holding and therefore is required to comply with the substantial requirements of:

a) One (1) full-time employee; and
b) RM20,000 annual operating expenditure in Labuan.
2) Definition of full-time employee for non-pure equity holding entity
An employee can be at any level with the functions or job scopes that are dedicated to serve the business operations of the Labuan non-pure equity holding entity.
  Please download the enclosure to this Circular for more details of the Pronouncement. The said Circular also available at the link below:
  https://www.labuanibfc.com/clients/Labuan_IBFC_78C2FF81-703A-4CAA-8926-A348A3C91057/contentms/img/Downloads/guideline/general/2020/LIC%20Pronouncement%203-2020.pdf?1584951989
   
Please be guided accordingly.
 
DR. NURMAZILAH DATO MAHZAN
Chief Executive Officer
 

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