Currently, Labuan offshore companies are not permitted to carry on shipping operations in Malaysia and any income from such operations is subject to normal income tax. It is proposed that the definition of "shipping operations" be introduced in the Labuan Offshore Business Activity Tax Act, 1990 to mean:

"the transportation of passengers or cargo by sea or the letting out on charter of ships on a voyage or time charter basis"

With the proposed amendment, shipping operations (e.g. bareboat charter) falling outside the above definition would constitute an offshore business activity and income derived therefrom by an offshore company would be subject to the 3% Labuan offshore business activity tax.

The above amendment will have effect from year of assessment 1999.
   
   
  It is proposed that an offshore company would no longer have the option to pay to the Labuan Offshore Financial Services Authority the fixed fee of RM20,000 as an alternative to the 3% Labuan offshore business activity tax. The proposed amendment is in line with the amendment of Section 151 of the Offshore Companies Act contained in the Offshore Companies (Amendment) Act, 1997.

The above proposal will have effect from year of assessment 1999.
   



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