Costs
What a Labuan company costs
The statutory fees for a Labuan company are modest and public, but the real annual cost is driven by economic substance — the full-time employees and operating expenditure you must maintain in Labuan to keep the preferential tax rate.
We publish the cost structure rather than a headline package price, because a single figure would be misleading. Two companies incorporated on the same day can have very different annual costs depending on whether their activity is in scope for economic substance and which branch of the rules they fall into.
What follows is what actually drives the number. Ask us for a written, all-in estimate for your specific activity — that is the only figure worth budgeting against.
Reference tables and diagrams
Most published Labuan quotes cover incorporation and the annual government fee, which together are a small fraction of the real number. The table below is the full picture for a company that actually meets its economic substance obligations — because that is what the 3% rate is conditional on.
Read the two columns separately. The first-year column includes the one-off items: incorporation, bank account opening, payroll setup and staff recruitment. The annual column is what recurs. The largest line in both is not a professional fee at all — it is salary and statutory contributions for the two Labuan-based staff, at roughly USD 17,100 a year, which is over half the total.
The totals come to approximately USD 32,300 in year one and USD 32,350 a year thereafter, converted at RM4.0 to the US dollar. Treat these as an order of magnitude rather than a quote: a company with a low transaction volume will pay less for accounting and audit, and one holding a Labuan FSA licence will pay considerably more. Please note that this estimated amount applies to a Code 23 entity. If your business activity is investment holding, the overall cost will be substantially lower.
| Description of services / items | 1st year cost (USD) | Annual cost (USD) |
|---|---|---|
| Company set up, bank account and annual renewals | 3,950.00 | 3,300.00 |
| One-time payroll set up services | 800.00 | – |
| Payroll services (per annum) for 2 staff | 1,350.00 | 1,350.00 |
| One-time staff recruitment services (USD500.00 per staff) | 1,000.00 | – |
| Salary expense and statutory contributions for 2 staff based in Labuan, with average basic salary of 1 manager (RM3,500.00) and 1 clerical staff (RM1,700.00) | 17,100.00 | 17,100.00 |
| Rental for a basic office to accommodate 2 staff (starts from USD400.00 per month) | 4,800.00 | 4,800.00 |
| Full accounting and tax filing services (starts from) | 3,300.00 | 3,300.00 |
| Audit fee (starts from) | – | 2,500.00 |
| Estimated total cost per year (USD) | 32,300.00 | 32,350.00 |
A low tax rate only helps if the saving is larger than what it costs to qualify for it. The two tables below run that comparison against a jurisdiction taxing at 20% — roughly the average statutory corporate rate across Asia — at two different profit levels.
At USD 150,000 of gross profit the numbers are close. Tax falls from USD 30,000 to USD 4,500, but the estimated cost of running the Labuan structure rises from USD 10,000 to USD 32,350, leaving a net saving of about USD 3,150. Worth having, but not obviously worth the administration.
At USD 250,000 the picture changes sharply. The cost of the structure barely moves — it is largely fixed — while the tax saving grows with profit, producing a net benefit of around USD 20,150. This is why we point to roughly USD 200,000 of gross profit as the level at which a Labuan company starts to make clear financial sense, and why we would rather tell you early if you are below it.
| Other Asian jurisdiction @ average tax of 20% | Labuan @ tax of 3% | |
|---|---|---|
| Assuming gross profit of USD150,000 | ||
| Gross profit | USD150,000.00 | USD150,000.00 |
| Tax | USD30,000.00 | USD4,500.00 |
| Estimated cost | USD10,000.00 | USD32,350.00 |
| Net profit | USD110,000.00 | USD113,150.00 |
| Potential net savings | – | USD3,150.00 |
| Assuming gross profit of USD250,000 | ||
| Gross profit | USD250,000.00 | USD250,000.00 |
| Tax | USD50,000.00 | USD7,500.00 |
| Estimated cost | USD10,000.00 | USD32,350.00 |
| Net profit | USD190,000.00 | USD210,150.00 |
| Potential net savings | – | USD20,150.00 |
The cost structure
Statutory fees are set by Labuan FSA and are identical whoever you engage. Everything below that varies.
- First-year capital registration (Labuan FSA)
- USD 300 where paid-up capital does not exceed RM50,000
- Annual fee (Labuan FSA)
- Payable annually, at a fixed fee of USD 1,000
- Trust company — registered office and resident secretary
- Annual. Mandatory; can only be provided by a licensed trust company
- Audit
- Required for Labuan companies. Billed by the audit firm, and scales with transaction volume
- Accounting and tax filing
- Annual, scaling with the volume of transactions
- Economic substance — operating expenditure
- RM50,000 per year for in-scope trading activity; RM20,000 for non-trading. This is expenditure you must actually incur in Labuan
- Economic substance — employees
- 2 fit and proper full-time employees in Labuan for in-scope trading; 1 for non-pure equity holding. Salary costs are the largest recurring item for most in-scope companies
- Work permit (if you want to reside in Malaysia)
- Advance payment of two years' company annual fees, approximately USD 2,000, plus a visa fee payable in Labuan that varies by nationality
The common mistake is budgeting the incorporation fee and forgetting the substance. For an in-scope trading company, the RM50,000 operating expenditure and two Labuan-based employees will dominate the annual cost — and failing to meet them means paying 24% instead of 3%, which is usually far more expensive than compliance.
Frequently asked questions
So what does it actually come to, in total?
As an indicative worked example for a fully substanced in-scope trading company: roughly USD 32,300 in year one and USD 32,350 a year thereafter. That covers company set up, bank account and annual renewals, payroll setup and payroll for two staff, staff recruitment, salary and statutory contributions for one manager and one clerical employee, basic office rental, accounting and tax filing, and the audit fee. It assumes an exchange rate of RM4.0 to the US dollar. It is an estimate, not a quote — but it is the right order of magnitude, and it is what most published figures leave out. Please note that this estimated amount applies to a Code 23 entity. If your business activity is investment holding, the overall cost will be substantially lower.
At what profit level does a Labuan company start to make financial sense?
Our view is that it becomes financially feasible at a gross profit of around USD 200,000 and above, where the tax saving begins to clearly outweigh the cost of maintaining the substance. Below that, the annual cost can absorb the benefit. Against a jurisdiction taxing at an average of 20%, the net saving works out at roughly USD 3,150 on USD 150,000 of gross profit, and roughly USD 20,150 on USD 250,000 — the gap widens quickly as profit rises, which is exactly why the break-even matters more than the headline rate.
What if the company makes a loss?
If the company reports an audited loss there is no tax payable, whether or not the economic substance requirements were met. The substance costs themselves still apply, and so does the audit wherever one is required.
Why do you not publish a fixed package price?
Because the honest answer depends on your activity. A pure equity holding company and an in-scope trading company have very different obligations and therefore very different annual costs. We publish the structure so you can see what drives the number, and we quote in writing once we know what you are doing.
Is Labuan cheaper than the alternatives?
It depends what you compare. Labuan's statutory fees are low, and the 3% rate is among the lowest available in a treaty-accessible jurisdiction. But the substance requirements mean a Labuan company is expected to be a real operating business, which is a genuine cost that purely offshore jurisdictions do not impose.
What is the most commonly underestimated cost?
Economic substance, without question — specifically the requirement for fit and proper full-time employees physically based in Labuan, and operating expenditure actually incurred there.
Speak to us
We are the licensed trust company, so the advice and the filing come from the same place.
Talk to our KonsultanSources
The primary documents this page relies on, linked to the authority that issued them. If one has moved, tell us and we will correct it.
- Labuan companies — Labuan FSA overview of the structure (opens in a new tab)
Labuan FSA · Regulator
Statutory fees are set by Labuan FSA and revised periodically — check the current figure against the regulator before budgeting.
- Guidelines on tax-related matters, including substance requirements (opens in a new tab)
Labuan FSA · Guideline
Last reviewed 4 August 2026
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.
Ready when you are
Talk to the firm that holds the licence.