FAQs, factsheets and other informative materials.
Labuan Islands
A quick look at Labuan, Malaysia
General Overview
Labuan is one of the three federal territories of Malaysia located off the north-east coast of Borneo in East Malaysia (Borneo Island comprises of territories belonging to three sovereign nations – Brunei, Indonesia and Malaysia).
The territory of Labuan consists of 7 small islands of which Labuan Island is the largest. The weather is tropical with the main island benefits from its nice beaches and excellent hotel facilities making it an ideal place for business and pleasure. The population of approximately 100,000 and the people are mostly bilingual with Malay language is the national language, but English is the main language of business.
Labuan is in the heart of the ASEAN community and the main island is accessible from Kuala Lumpur, Kota Kinabalu (the capital of Sabah, a northern state in the Malaysian Borneo) and Brunei.
Important Features of a Labuan Company
All Labuan companies are governed by the Labuan Companies Act 1990 and companies incorporated in Labuan carrying out either trading or investment holding (“non-trading”) activity. Labuan Financial Services Authority (Labuan FSA) is the statutory body responsible to regulate and supervise international businesses and financial services industry in Labuan. Type of Labuan business activities: Trading and Non-Trading (“investment activities”) Permitted Activities: May carry out any business that is lawful in Malaysia either in, from or through Labuan – - can conduct business activities with residents of Malaysia; - can transact in Ringgit Malaysia (RM); - relevant activities including holding companies are subject to economic substance requirements in Labuan; - royalty and other income derived from IP rights are subject to tax under the domestic Income Tax Act 1967; - banking, insurance, trust companies, leasing, fund management and other financial services and activities require licensing from Labuan FSA Main Legislations: 1. Labuan Companies Act 1990; 2. Labuan Business Activity Tax Act 1990 (and its amendments); and 3. Labuan Financial Services and Securities Act 2010 Taxation: - Labuan trading companies listed under the schedule are subject to 3% tax of net audited profit - Labuan non-trading companies benefit from 0% tax - All Labuan companies that are in scope will be subject to ‘economic substance requirements’ under the Labuan tax regime, and will benefit from the preferential tax rates mentioned above - Labuan companies that do not comply with the ESR will be taxed at a flat rate of 24% - All Labuan companies receive Tax Identification Number (TIN) Registered Agent/Office: Required Incorporation Time: Minimum 2 business days Annual Fees Payable to Labuan FSA: - 1st year capital registration – USD300 for paid-up capital not exceeding RM50,000 (approx. USD10K) - Annual – USD800 Confidentiality: Yes Bearer Shares: Not permitted Minimum Capital: 1 share Currency of Capital: Any currency except Ringgit Malaysia (RM or MYR) Shareholders: Minimum 1, corporate shareholder is allowed Directors: Minimum 1. If corporate director is appointed the composition must have a minimum of two directors with at least 1 director is a natural person and designated as "resident director". Company Secretary: Resident secretary is mandatory Registered Office: Registered office address in Labuan is mandatory Public Records: No, However, 3rd party can now do search at the Registry provided written consent from a director is obtained Location of Meetings: Anywhere Common Seal: Yes Company Accounts: Yes Audited Accounts: Required Annual Return: Yes Change in Domicile: Yes
FAQs on Labuan work permit
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Hi, I am not Malaysian, but I am a director of my own Labuan company. Can I reside and work in Malaysia?Certainly! You can apply for a 2 years renewable work permit which allows multiple entry into Malaysia with no visa required. With the work permit, you can conveniently enter and reside in Malaysia to facilitate your business meetings and to carry out your business operation.
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If I want to employ an expatriate to work with me in my Labuan company, can he obtain a work permit?Yes, he is eligible to apply for work permit. However, it should only be in respect of the following positions as specified by the Immigration Department of Malaysia – Top management (i.e. Chief Executive Officer, Chief Financial Officer, Chief Operating Officer); Technical experts (i.e. IT specialist or other specialists related to Labuan trading activities); Professionals such as accountant, lawyer, consultant, underwriter, economist, advisor, engineer, actuary, trader) – please note this is only applicable if you own a Labuan International Commodity Trading Company.
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My family would like to join me to live in Malaysia. Am I able to sponsor them with my work permit?Yes, your spouse, children under age 21 and your parents may apply for dependent pass under your work permit. Please take note that a stamped duty paid personal bond signed by yourself is required to secure your parents' dependent passes.
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With the work permit under my Labuan company, can I reside in any part of Malaysia?Unfortunately, no. Currently you are only eligible to reside anywhere in the Peninsular Malaysia and Labuan. You can base yourself in Kuala Lumpur but before doing that you will need to apply and obtain approval from Labuan FSA for a marketing office in KL, in addition to your Labuan main operational office.
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Can you share with me on the eligibility criteria to apply for work permit?Sure, there’s a checklist of requirements to be fulfilled – minimum income of RM10,000 per month which may consist of basic salary, cash allowance, benefits-in-kind, value of living accommodation and other fees and commissions; possess competency and working experience related to the position applied; and meet the “fit and proper person requirements”.
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Brilliant! Are there any fees to pay and documents that need to get prepared for my work permit application?Work permit application involves two approving authorities namely Labuan FSA and the Immigration Department. Fees to be paid and documents to be submitted to Labuan FSA are as follows – Make an advance payment covering 2 years of your company's annual fees, approx. USD1,600.00; Comprehensive business plan; Employment contract, duly stamped; Labuan office's tenancy agreement, duly stamped; Income tax reference number (Labuan entity, employer’s tax reference and employee’s tax reference); Recommendation letter from a trust company in Labuan; Form DP11; Copy of applicant’s passport, with validity period of not less than 12 months; Applicant’s passport sized-photo, high resolution with white background; CV and copy of academic certificates; and Any other documents required by the approving authorities. All supporting documents are to be certified by Notary Public in your home country. Documents which are not in the national language of Malaysia or in English is required to be translated by a qualified translator. Please contact us for the latest checklist of documents issued by the Immigration Department.
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I am told that I need a residential address in Malaysia to apply for work permit? Is this the case?That is true. However, it is no longer a requirement under the new guideline issued by Labuan FSA. Instead, the employer or company must provide an address in Labuan. If, for example, the work permit holder will be based in KL, the company must first apply and obtain approval for a KL marketing office from Labuan FSA.
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Do I have to travel to Malaysia to apply for work permit?Once your work permit is approved, you must travel to Labuan and proceed to the Immigration Department for visa stamping on your passport. If you're already in Malaysia at the time of approval, you must exit the country and re-enter into Malaysia for the work visa endorsement done in Labuan. This meeting is only mandatory for first time application of the work permit. Visa fee is payable to the Immigration Department when you're in Labuan. Fee varies depending on the applicant's nationality. The visa fee is payable via debit/credit card only. You may also be required to attend an interview session conducted by Labuan FSA at their discretion.
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Am I subject to personal income tax after obtaining my work permit?Expatriates receiving income (including employment income) from a Labuan company is required to file a tax return with the Inland Revenue Board of Malaysia (“IRB”). Your employment income is taxable by the IRB and you are required to file for personal tax return before 30th April annually.
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Beside the salary derived from Labuan company, I expect to receive director’s fee. Will the director's fee be taxed as well?Director’s fee is not taxable. However, you are required to declare this income in your personal tax filing annually. This incentive has been extended until YA2025.
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What about the requirements for my dependents? Any checklist you can share with me?There is no need to re-apply separately with Labuan FSA. As long as you receive a letter of approval from Labuan FSA, you may apply to include dependent pass for your dependents simultaneously under your approved visa. Documents required for submission to the Immigration Department include the following - Covering letter from you or your employer (employing company); Spouse - copy of marriage certificate; Children - copy of birth certificate/custody letter (for adoptees); Parents - personal bond; Form DP11A; and High resolution passport-sized photo, with white background. All copy documents for your dependents must be duly certified by the employer and counter certified by your country's respective Consulate Office in Malaysia.
Please note that whilst considerable care has been taken to ensure the information contained within this page is accurate and up to date, no warranty is given as to the accuracy or completeness of any information and no liability is accepted for any errors or omissions in such information. The information given in this page is based on our present understanding of the current laws, guidelines and regulations and may therefore be subject to change without notice.