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LABUAN COMPANIES

RESOURCE CENTRE
Labuan Companies
  • A Federal Territory of Malaysia
  • The only offshore jurisdiction of Malaysia, situated approximately 8km off the north-west coast of Borneo, adjacent to the Malaysian state of Sabah
  • 92 square kilometers in area with a population of approximately 90,000 people
  • Malaysia's only International Business and Financial Centre with its own regulator and tax regime (1990) Malaysia most established duty-free island
  • Labuan Companies can engage in a range of activities:
  • Investment holding companies
  • International trading companies
  • International shipping companies
  • Intellectual property licensing companies
  • Mutual fund establishment
  • Banking and financial institutions*
  • Leasing and bareboat chartering companies*
  • Insurance, reinsurance, captive insurance, protected cell companies, takaful and retakaful activities*
  • Fund management*
  • Investment advisory / securities licensee / money broking*
  • * Requires license from Labuan Financial Services Authority
    Key features of a Labuan Company
  • 0% tax on non-trading activity (investments). No further tax on dividends remitted back to home countries
  • 3% of net audited profits or RM20,000 flat tax on trading activity
  • 0% Withholding tax: Dividend, royalty, lease rental, interest, technical or management Fee
  • No capital gains tax, estate or inheritance tax
  • 0% indirect tax (such as Sales Tax, Service Tax, GST, VAT and Custom Duty)
  • 0% Personal Income Tax for Non-Malaysian Director
  • 0% Stamp Duty – Labuan is a free tax port
  • No foreign ownership limitations
  • Eligible to open bank account in multiple currencies
  • No foreign exchange control rules
  • Business confidentiality. Shareholders' & Directors' information are not available for search
  • Access to Malaysian Double Tax Treaties (DTA) with more than 70 Countries
  • Capital denomination in any currency, except Malaysian ringgit
  • Setting up a Labuan Company
  • The Labuan Companies Act 1990 ("LCA") requires a Labuan company to employ the services of a trust company to act as its incorporation agent. The services offered by a trust company include, but are not limited to, the following:
  • Provides the registered office and resident secretary
  • Performs the secretarial duties of the Labuan company including lodgement of any documents required under the LCA
  • Makes available any of its trust officers for appointment as resident director and resident secretary
  • Registering a company name
  • New company names cannot be similar or the same as the names of existing companies registered in The words "bank", "finance", "fund", "trust" or any other license-linked-word (i.e. insurance) should be avoided. The exception is if the company will undertake these specific business activities, most of which requires a corresponding business licenses.
  • A Labuan company shall have, as part of its name:
    • - the word "Corporation" or the word "Incorporated" or the abbreviation"Corp." or "Inc.",
    • - the word "Limited" or the abbreviation "Ltd.",
    • - the words "Public Limited Company" or the abbreviation "L.C.",
    • - the words "Societe Anonyme" or "Sociedad Anonima" or the abbreviation "S.A.",
    • - the words "Aktiengesellschaft" or the abbreviation "A.G.",
    • - the words "Naamloze Vennootschap" or the abbreviation "N.V.",
    • - the words "Perseroan Terbatas" or the abbreviation "P.T.", or
    • - in romanised characters, any word or words in the national language of any country which connote a joint stock company limited by shares, or any abbreviation thereof,
    • - the word "(L)" as part of its name, and
    • - the word "Berhad" or the abbreviation "Bhd." but where the word "Berhad" or the abbreviation "Bhd." is used as part of the name of the Labuan company; the Labuan company should also have the word "(L)" as part of its
  • Share Capital
  • There is no minimum share capital requirement. However, our standard companies will have a minimum of USD1 paid-up capital, comprising one issued
  • Shareholders may either be individuals or corporations.
  • Share capital can be held in any currency other than Malaysian
  • Directors
  • Labuan companies must have at least one director, either a corporation or an individual. The director may be a non-resident or resident of Malaysia. An officer of a trust company may be the resident director of the Labuan Particulars of the directors must be filed with the Labuan Financial Services Authority (FSA).
  • Directors
  • Labuan companies must have at least one director, either a corporation or an individual. The director may be a non-resident or resident of Malaysia. An officer of a trust company may be the resident director of the Labuan Particulars of the directors must be filed with the Labuan Financial Services Authority (FSA).
  • Company Secretary
  • The company must have a resident secretary (individual or corporate), which must be appointed from a trust company.
  • Particulars of the company secretary must be filed with the Labuan.
  • Registered office
  • All Labuan companies must have a registered office in Labuan, which must be the principle office of a Labuan trust
  • Annual Fees
  • An annual fee of RM2,600 / USD800 is payable on or before the anniversary of incorporation to renew the registration of the company for a further 12
  • Tax Returns
  • Annual tax returns must be filed to the Inland Revenue Board.
  • Labuan companies engaged in Labuan trading activities are subject to corporate profit tax, which will be levied at 3% on chargeable net profit as per the audited
    • Alternatively, a company can elect to pay a flat tax of RM20,000.
  • For companies engaged in Labuan non-trading activities, no tax is payable on income earned through these activities. In such cases, only a zero-tax return is filed.
  • Taxation of Labuan Companies
  • Labuan trading activities include banking, insurance, trading, management, licensing, shipping operations or any other activities that do not fall within the definition of non-trading Labuan companies conducting Labuan trading activities:
    • - A rate of 3% on chargeable profit (i.e. net profit as reflected in the audited accounts), or
    • - A flat tax of RM20,000. Every year a Labuan trading company must elect the method of
  • Labuan non-trading activities can include the holding of securities, stock, shares, loans, deposits or any other properties by a Labuan company on its own behalf. Labuan companies conducting non-trading activities:
  • - No tax is payable on profit earned by a Labuan Company when it is engaged in Labuan non-trading
  • In cases where a Labuan company is involved in trading and non-trading activities, it will be taxed as if it were undertaking trading
  • Other tax exemptions
  • Under the Malaysian Income Tax Act 1967 (ITA), the following are exempted from income tax:
    • - Dividends paid by a Labuan company out of income derived from a Labuan business activity or out of exempt income. Such dividends will be paid gross without any tax
    • - Interest paid by a Labuan company to a non-resident, resident or another Labuan
    • - Royalties paid by a Labuan company to a non-resident or another Labuan
    • - Technical or management fees paid by a Labuan company to a non-resident or to another Labuan
  • Withholding tax exemption for payments of dividends, interests, technical fees and royalties made by a Labuan company to non-residents or another Labuan
    • - 100% tax exemption on fees paid to a non-citizen Director of a Labuan
    • - 50% tax exemption on salary paid to a foreigner employed by a Labuan
    Double Taxation Agreements (DTAs)
  • Labuan companies benefit from Malaysia's double taxation agreements (DTAs), which can minimise withholding and capital gains
  • Malaysia has approximately 69 DTAs with countries across Asia, Europe, Africa and the Middle
  • For a full list of countries, see http://www.hasil.gov.my/
  • It should be noted, however, that certain DTAs do not apply to Labuan. Specific advice should be sought prior to applying for DTA benefits for
  • In light of greater global competition, the government announced during the 2008 budget that a Labuan company given the option to be taxed under the ITA is irrevocable. With this option, upon an unchangeable election to be taxed under the ITA, a Labuan company would gain access to all of Malaysia's double taxation agreements.
  • Stamp Duty Exemption
  • Under the Stamp Duty (Exemption) (No. 3) Order 2012, the following are exempt from stamp duty:
    • - all instruments which are executed by a Labuan entity in connection with a Labuan business activity,
    • - all Memorandum and Articles of Association, statute, charter, rules, by-laws, partnership agreement or other instrument, under or by which a Labuan entity is established, and
    • - all instruments of transfer of shares in a Labuan



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