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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 located 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 (LFSA) 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);
3. Labuan Financial Services and Securities Act 2010
Taxation:
- Labuan trading companies 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: 2 business days
Annual Fees Payable to Labuan FSA:
- 1st year capital registration – USD300 (approx. equivalent in RM1,000) for paid-up capital not exceeding RM50,000
- Annual – USD700 (approx. equivalent in RM2,600)
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, corporate director is allowed
Company Secretary: Resident company secretary is mandatory
Registered Office: Registered office address in Labuan is mandatory
Public Records: No
Location of Meetings: Anywhere
Common Seal: Yes
Company Accounts: Yes
Audited Accounts: Mandatory for Labuan companies carrying on trading activities. Optional for Labuan investment holding companies
Annual Return: Yes
Change in Domicile: Yes
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.
Information provided by © HMR Konsultan (UPDATED Apr2020)