What specific Islamic finance activities are targeted by the new tax incentives?

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New Tax Incentives Target Specific Islamic Finance Activities in Labuan

The newly announced tax incentives are specifically designed to bolster Islamic finance activities within the Labuan Business and Finance Centre (Labuan IBFC). These incentives, effective from the year of assessment 2024, will grant eligible Labuan entities a full income tax exemption for a period of five years. This initiative aims to stimulate growth in key areas of the Islamic finance sector, fostering innovation and expanding the centre's capabilities as a global Islamic financial hub.
Islamic Digital Banking and Exchange Activities

A primary focus of the tax incentives is on entities involved in Islamic digital banking and Islamic digital exchanges. This move is intended to encourage the development and adoption of digital platforms for Islamic financial services, aligning with global trends towards digitalisation. The exemption is expected to attract more players to establish and operate these digital financial services within Labuan, enhancing its position in the digital Islamic finance landscape.
Ummah-Linked Companies (ULCs) and Islamic Social Finance

The incentives also extend to Ummah-Linked Companies (ULCs), which are Labuan entities engaged in Islamic social finance. These activities encompass the collection of funds for purposes such as savings for Hajj and pension schemes, as well as the global collection of zakat and wakaf funds. By providing tax relief, the government aims to support and expand the reach of Islamic social finance initiatives, particularly those serving the needs of the global Muslim community.
Islamic Token Issuers and Digital Assets

Furthermore, the tax incentives are targeted at Islamic token issuers, including those dealing with Islamic digital assets. These digital assets are referred to as RAMZ in Arabic. This inclusion signals a strategic effort to embrace and regulate the burgeoning field of digital assets within an Islamic finance framework. The upcoming listing of the world's first asset-backed securities token, RAMZ, on Labuan's digital exchanges is seen as a direct beneficiary and validation of this incentive.
Support for Labuan's Islamic Digital Asset Centre (IDAC)

These tax measures are designed to provide an added impetus to Labuan's Islamic Digital Asset Centre (IDAC) initiative. Launched by Labuan FSA, IDAC functions as a digital gateway for fundraising and investment, with a specialisation in environmental, social, and governance (ESG) and Shariah-compliant ventures. The incentives will enable companies, including SMEs, to digitise assets, issue tokens for investment, and trade them on exchanges, all underpinned by a Shariah-compliant blockchain infrastructure.

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What specific Islamic finance activities are targeted by the new tax incentives?

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