Employer's Obligations and Accounting Standards for Labuan Entities 101

To fulfil one of the economic substance requirements (ESR) for your Labuan entity, most business activities under the Labuan tax regulations mandate the hiring of full‑time employees who are physically based in Labuan. This guideline outlines your obligations as an employer and the bookkeeping responsibilities applicable to your Labuan entity.

Employers’ Obligations

If you are hiring a local Malaysian, please note that the minimum gross monthly salary for a full‑time employee in Malaysia is RM1,700.00. Foreign hiring is subject to work permit conditions as set out by Labuan FSA and the Immigration Department and approvals by these agencies respectively. Most employees fall under the Employment Act 1955, which serves as Malaysia’s primary labour legislation.

Employer must register both their Labuan entity and employees with the relevant government agencies, and ensure all statutory contributions are made accurately and on time.

Government Agencies	Where and How to Register
Employees Provident Fund (EPF) or KWSP Mandatory retirement saving schemes, contribution to be made by employer and employee at the prescribed contribution rate.	Visit any EPF branch nationwide
Social Security Organisation (SOCSO) Provides social security protection to employees against work-related injuries, contributions to be made by employer and employee based on the employee’s monthly salary.	Online https://assist.perkeso.gov.my/employer/login
Social Security Organisation – Employment Insurance System (SOCSO-EIS) Provides financial assistance to employees who lose their jobs, contributions to be made by employer and employee based on the employee’s monthly salary.	Online https://assist.perkeso.gov.my/employer/login
MY Future Jobs Portal National employment platform, run by SOCSO to connect job seekers with employers.	Online https://myfuturejobs.gov.my/
Inland Revenue Board of Malaysia (IRB) Make monthly tax deductions from employee’s remuneration.	Online https://mytax.hasil.gov.my/
Human Resources Development Fund (HRDF) A levy for employee training (only applicable based on headcount/industry)	Online https://hrdcorp.gov.my/registered-employers

Employee Hiring

1.     Create job advertisement and to notify SOCSO of the job vacancy by posting them on MYFutureJobs portal (myfuturejobs.gov.my).

2.     Once a prospect employee is identified for the job position, proceed with the employment offer by signing the employment contract. The employment contract must be duly stamped within 30 days of contract execution. All stamp duty assessment and payment services are available on MyTaxPortal via e-Stamp Duty System.

3.     Register the new employee on EPF via i-Akaun and on SOCSO via Portal ASSIST.

4.     Notify IRB of the new employee via MyTaxPortal and complete the Form CP22 within 30 days after commencement of employment.

5.     Make mandatory contributions to EPF via i-Akaun and on SOCSO via Portal ASSIST before 15^th day of the following month.

6.     Make levy payments to HRDF via e-Tris portal before the 15^th day of the following month.

7.     Make monthly tax deductions to IRB through MyTaxPortal if your employee’s monthly salary exceeds a certain amount before 15^th of the following month.

Employee Resignation or Termination

1.     Notify IRB about employee resignation or contract termination via MyTaxPortal and complete the Form CP22A within 30 days after employee cessation. If the employee is and expatriate and leaving Malaysia for over 3 months, submit CP21 at least 30 days before departure.

2.     Notify EPF and SOCSO by updating exit date and ensuring final contributions are paid.

Annual Filing as Employer

1.     To provide EA form (Statement of Remuneration) to all employees before the last day of February of the following year. EA form is an annual statement detailing an individual employee’s total earnings and deductions for the year, provided for to the employee for their own personal tax filing.

2.     To file Form E (Employer’s Tax Return) along with CP8D, a statement declaration of all employees, their total remuneration for the year, and the total amount of monthly tax deductions made. Form E must be filed by 31^st March of the following year via MyTaxPortal.

Accounting Standards for your Labuan Entity

Labuan company may adopt the Malaysian Financial Reporting Standard (MFRS) or Malaysian Private Entities Reporting Standard (MPERS) as accounting standards when preparing their management accounts.

If your Labuan company is a licensed entity, you must adopt either the International Financial Reporting Standard (IFRS) or at least the MFRS when preparing accounts, in accordance with the specific directives set out by Labuan FSA.

Most Labuan companies are required to have their financial statements audited annually by an external approved auditors in Labuan. A list of approved auditors can be found on Labuan FSA’s website.