The jurisdiction, part of Malaysia, has set out its plans for staying ahead in a competitive environment for international financial centres.

The international financial centre of Labuan in Asia, which calls itself a “midshore” jurisdiction, says it focusing on a narrower range of business it wants to attract, concentrating on areas such as wealth management, commodity trading, captive insurers and leasing.

“We now need to further refine the `midshore centre’ concept by moving away from broad-based financial services already widely offered and available onshore, to focus on niche areas with high growth potential,” Labuan Financial Services Authority said in document, quoting Malaysia’s Central Bank Governor, who is also the chairman of Labuan Financial Services. 

The document, entitled Labuan IBFC: Present and Future, set out how the jurisdiction, a territory of Malaysia, intends to change next year and beyond. (Labuan International Business and Financial Centre is a special economic zone of the Malaysian government based on the island of Labuan.) Moves are under way to harmonise the tax regime of Labuan IBFC with the national tax regime as part of a drive to curb tax evasion and profit shifting, the report said. However, business transactions involving non-residents will continue to be incentivised. 

The announcement comes at a time when jurisdictions around the world are facing up to demands for more transparency so as to close down secretive accounts and fight tax evasion. As part of Malaysia, Labuan is affected by the introduction of the Common Reporting Standard, for example, which is an international system of data exchange. The Standard takes effect from 2017. Malaysia is in the second wave of countries adopting the system, meaning it takes effect there from 2018.

In 2017, Labuan IBFC will review its regulatory framework to ensure it remains robust and up to date; it will improve how information is used by the regulators, making use of technology to that end; the financial centre will also implement the intergovernmental agreement to ensure the jurisdiction complies with the US Foreign Account Taxation Compliance Act (FATCA). 

The changes involve the Labuan FSA collaborating with Bank Negara Malaysia, the Ministry of Finance and Labuan Corporation, the report said.