The Labuan Business Activity Tax (Exemption) Order 2024 [P.U.(A) 127/2024] (“Exemption Order”) was gazetted on 17 May 2024 and shall have effect for a five-year period from the year of assessment 2024 until the year of assessment 2028 (“Exemption Period”).
 
The Exemption Order exempts a qualifying Labuan entity specified in column (2) of the Schedule to the Exemption Order that carries on a Labuan trading activity in relation to the promoted Islamic finance sectors specified in column (3) of the Schedule to the Exemption Order from payment of tax on its income derived from the qualifying activity for each year of assessment during the Exemption Period.
 
The Schedule to the Exemption Order is reproduced below:
 

Where a Labuan entity carries on any activity or business other than a qualifying activity, each of such activity or business shall be treated as a separate and distinct source of activity or business for the Labuan entity. The Labuan entity which is granted an exemption under the Exemption Order is required to maintain a separate account for the income derived from each activity or business carried on.
 
Alert by Sharifah Shafika Alsagoff (Partner) of the Islamic Finance Practice of Skrine.