Overview of Labuan Forex License: main aspects, terms, costs

Opening your foreign exchange company in the Asia-Pacific region via Labuan is hassle-free as the Island provides absolute fοreign οwnership and low taxation rates. The local authorities have updated rules for money brokers effective from 1st January 2018. Under them, the mοney broker is determined as the company carrying out payments between parties in the FX market with brοkers conducting activities as agents. But a Labuan Forex license doesn’t cover purchasing or selling of MYR and other monetary units by the brokers as principals in such Fοrex platforms.

Core peculiarities of a license

LFSA is the statutory body in charge of the development and administration of the financial center. It issues the Forex License which empowers purchasing, selling securities and futures and managing an investment portfolio for and on behalf of the clients. It has the following features:

• No restrictions for foreign persons to own a business with no obligation to have a local partner;
• Corporate taxation rate on trading returns constitutes 3%;
• No taxation for withholding interests;
• No forms of controls imposed by a government on the purchase/sale of foreign monetary units;
• No forms of controls imposed by a government on the purchase/sale of foreign monetary units;
• 50% taxation abatement for foreign employees’ hiring;
• No taxation on fees for overseas senior management and interests to sharehοlders.

Who is an eligible applicant?

The right to get a Labuan Forex Money Broking License is granted to the following categories:

1. Natural person or entity with Forex dealing expertise and brilliant reputation;
2. Money brokerage firm already regulated or an overseas broker with a permit from home authorities;
3. Organizations that act in accordance with the bill on financial services with authorisation from the Bank Negara Malaysia.

Applying for a Labuan Money Brokering License for Forex Broker

1. The company can be formed with a minimum of MYR500,000 as a paid-up capital;
2. An office must be set up;
3. Payments are available in any local or foreign currencies;
4. All payments must be carried out to, through, and from the island;
5. The broker must set a max. leverage limit of 100:1 on payments (meaning a min. of 1% margin deposit to establish a trading position).
6. Partnerships with principal brokers, liquidity providers, software providers must be established, and duplicates of contracts must be in place.
7. Ensure the broker and liquidity provider are supervised.
8. For all technological developments used, any incidents that happened must be notified to LFSA with a description within 2 weeks.
9. The company must employ an external auditor to conduct an audit of operations once a year.
10. All negotiations and contracts with customers and partners must be documented.
11. The company must adhere to the AMLCFT Law and rules of the Central Bank. To ensure its transparent operation, the it is necessary to employ a compliance officer.
12. If shareholders, directors, offices, foreign branches are changed, and outsourcing arrangements are amended, first they must obtain approval from LFSA.
13. An annual license is MYR 5,000.

Application time frames

The procession of an application typically takes approx. 30 – 60 days, depending on further information and supporting documents required by the Authority. An applicant may be asked to provide more documents or be additionally interviewed by the Authority to understand or clarify certain processes.

If you have any questions or intend to apply for a license, please contact us. Our experts have huge expertise in buying and selling businesses, as well as licensing.

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