LME Allows Malaysian Warehouses to Accept Metal After Tax RulingEddie van der Walt
The London Metal Exchange will allow Malaysian warehouses to keep accepting metal after finance officials exempted transactions from a new tax, according to a statement from the exchange.
The LME threatened earlier this month to stop letting warehouse companies in Johor and Port Klang from issuing warrants if the metal was subject to a goods and services tax that starts April 1. Malaysia’s warehouses hold about 85 percent of the LME-registered tin and about half of the nickel globally, as well as almost all zinc and lead in Asia, bourse data show.
“People tend to assume that these things will be worked out in the end, and indeed, this one was,” Stephen Briggs, a senior strategist at BNP Paribas SA, said by phone from London. “This is broadly what the market had expected, I doubt it will have much price impact.”
The Ministry of Finance confirmed that deals related to LME stockpiles within the free-trade zone will not be taxed, according to a statement e-mailed by the exchange on Monday. The LME also said it has proposed that the tax on owners for rental charges be mostly eliminated.
The LME’s futures contracts can result in delivery of metal to and from more than 650 approved depots worldwide. In addition to Malaysia, the exchange has registered warehouses in Asia in Singapore, South Korea and Taiwan. Locations are approved by the bourse based on several conditions including their tax-free status. Warrants are documents entitling owners to metal held in the facilities.
A goods and services tax of 6 percent will be implemented in Malaysia this week to boost revenue and help cut the fiscal deficit. It will replace an existing sales and services tax.