LABUAN BOOSTS ISLAMIC DIGITAL BANKING WITH I-BOX INCENTIVE PACKAGE

LABUAN, July 4 (Bernama) -- The Labuan Financial Services Authority (Labuan FSA) has introduced guidelines for the establishment of Labuan Islamic digital banks effective July 1, 2024, under its new sandbox regulatory requirements. 

The initiative aims to bolster the Islamic digital banking sector by leveraging incentives under its International Business and Financial Centre (IBFC) Islamic digital finance sandbox, known as 'i-BOX'.

The development complements the island’s digital banking framework and marks a significant step towards positioning Labuan as a premier Islamic international financial hub.

In a statement released today, Labuan FSA said the guidelines follow Prime Minister Datuk Seri Anwar Ibrahim’s announcement at the Global Forum on Islamic Economics and Finance on May 28, 2024, that Labuan’s i-BOX would include an incentive package to promote the establishment of Islamic digital banks in the region.

The i-BOX initiative is designed to attract new entrants to the Islamic digital banking space by offering banking facilities and support to entities operating under the Islamic Digital Asset Centre initiative. 

This move is expected to catalyse the growth of Labuan as a significant player in the international Islamic financial landscape.

Labuan FSA also noted that the introduction of i-BOX aligns with the recent issuance of the Labuan Business Activity Tax (Exemption) Order 2024. It exempts four types of Labuan entities, including Labuan Islamic digital banks, from paying taxes on qualifying activities from the year of assessment 2024 (YA2024) until YA2028.

Successful applicants will be admitted to the i-BOX programme for three years and be given a series of exemptions.

They will be exempted from a three-year audited balance sheet to meet the licensing criteria, as required under Section 63(2)(e) of the Labuan Islamic Financial Services and Securities Act 2010, a five-year employment pass for professional expatriates to work in Labuan or Malaysia, and a tax waiver from year of assessment 2024 (YA2024) to YA2028.

They will also have the option to establish a co-located office anywhere in Malaysia on receiving a licence to conduct Labuan Islamic digital banking business.

The statement said the i-BOX initiative is to foster a thriving and competitive Islamic digital banking sector in Labuan IBFC by encouraging participants to leverage technological advancements and embrace product innovations.

This will facilitate the creation of a unified regulatory framework for Islamic digital finance on an international scale, promoting collaboration and efficiency in the sector.

The synchronised announcement of the i-BOX incentives and the launch of a master plan for Labuan's Shariah-compliant blockchain hub are expected to attract fintech enterprises and other interested parties to explore the burgeoning opportunities in Labuan.

By integrating technology-driven solutions with Islamic financial services, Labuan is poised to become a digital gateway for a diverse range of international investors and participants. Labuan FSA remains optimistic that these innovations will contribute to meeting the needs of the underserved global market and the unbanked population, advancing Labuan IBFC's financial inclusion agenda.

-- BERNAMA