FAQ
01
How to establish a Labuan company in Labuan IBFC?
Incorporation of a Labuan company in Labuan IBFC must be done through a Labuan trust company. The application should be submitted together with the Memorandum and Articles of Association, consent letter to act as director, statutory declaration of compliance as well as payment of registration fees based on paid-up capital.
02
What is the definition of Labuan of trading and non-trading activities?
Labuan trading activity includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity.
Labuan non-trading activity means an activity relating to the holding of investments in securities, stocks, shares, loans, deposits or any other properties situated in Labuan by a Labuan entity on its own behalf.
Labuan non-trading activity means an activity relating to the holding of investments in securities, stocks, shares, loans, deposits or any other properties situated in Labuan by a Labuan entity on its own behalf.
03
What is the definition of Labuan business activities?
Labuan business activities is defined as a Labuan trading or non-trading activity carried on in, from or through Labuan, excluding any activity which is an offence under any written law.
04
What is the rate of tax imposed on Labuan business activities?
The rate of tax imposed is 3% of audited net profits for trading activity and zero percent for non-trading activity, provided that the Labuan entities are in compliance with the tax substantial activity requirements.
05
Can a Labuan company elect to be taxed under Income Tax Act 1967?
A Labuan company can elect to be taxed under ITA, pursuant to Section 3A of Labuan Business Activity Tax Act 1990 (LBATA).
06
Can a Labuan company pay Business Zakat instead of tax?
A tax rebate is granted to a Labuan company for each year of assessment for any business zakat which is paid in the basis period for that year of assessment to, and evidenced by a receipt issued by, a Labuan Islamic religious authority.
However, where the total amount of the rebate exceeds the tax charged (before any such rebate) for any year of assessment, the excess is not refunded or is available as a credit to set off his tax liability for that year of assessment or any subsequent year.
However, where the total amount of the rebate exceeds the tax charged (before any such rebate) for any year of assessment, the excess is not refunded or is available as a credit to set off his tax liability for that year of assessment or any subsequent year.
07
Do Labuan tax incentives apply to all types of Labuan entities?
The tax incentives for Labuan IBFC apply to all types of Labuan entities as prescribed under the Labuan Business Activity Tax (Requirement for Labuan business activity) regulations 2018.
08
What is so unique about Labuan tax regime?
In addition to the numerous tax incentives accorded for Labuan IBFC, the unique features of Labuan tax regime are:
- Less tax filing obligations;
- No estimation of income and bi-monthly deductions;
- Perpetual tax exemptions; and
- Labuan entities may access benefits under the Malaysia DTAs.
09
What is the difference between trading and investment companies?
Investment companies usually only "hold" assets, or shares in companies located in other jurisdictions. Trading companies are defined as those which actually carry out business on a day to day basis.
10
Are there any requirements on minimum capital and shareholding?
A minimum of one share is required. Apart from this there is no minimum capital requirement, and Labuan companies may issue shares of different classes and of different rights but no bearer shares are allowed. Shares may be denominated in any currency except in Malaysian Ringgit.
The minimum number of shareholders in an offshore company is one (1). The shareholder may be an individual, a corporation or a trust company holding the shares as a nominee, or on trust.
The minimum number of shareholders in an offshore company is one (1). The shareholder may be an individual, a corporation or a trust company holding the shares as a nominee, or on trust.
11
Are there any audit requirements?
A Labuan company is required to maintain proper accounting and other records in Labuan, and those proper accounting and other records shall be kept at the registered office of the company or other places in Labuan. Such accounting and other records shall be open at all times for inspection by a director of the offshore company.
12
What is the composition of directors and secretaries in a Labuan company?
A Labuan company must have at least one director who can act as a resident director and a resident secretary.
13
Does Labuan company need a physical presence in Labuan?
In order for Labuan company to avail for Labuan IBFC tax incentive, Labuan company is required to have physical office with adequate number of full time employees in Labuan and adequate amount of annual operating expenditure as prescribed under the Labuan substance regulations.
14
Can Labuan company open bank accounts?
Labuan company can open foreign accounts with any banks in Labuan or outside Labuan. However, the account name must be the Labuan company name.
15
Is Labuan IBFC subject to exchange control?
The operations of Labuan companies in Labuan IBFC are completely free from exchange control regulations when dealing with non-residents.
16
What is Labuan Pre-Incorporated Company?
The Labuan Pre-Incorporated Company (LPC) is basically a normal Labuan company that is incorporated through normal approach but owned but Labuan trust companies (LTC). This is new initiative introduced by Labuan FSA to allow LTC to pre-incorporate a Labuan Company and make it available to investors who are keen to purchase a ready-made company in Labuan.
17
What is the governing legislation for Labuan company?
Labuan company is governed by Labuan Companies Act 1996.
18
What are the fees payable by Labuan companies in Labuan IBFC?
The fees payable are illustrated in the table below:
Registration Fees
Amount
Paid-up capital
RM 50,000 and below
RM1,000
USD300
Exceeds RM 50,000 but less than RM 1 million
RM2,000
USD600
RM 1 million and above
RM5,000
USD1,500
Registration of foreign company
RM6,000
USD2,000
Annual Fees
Amount
Labuan company
RM2,600
USD800
Foreign Labuan company
RM5,300
USD1,500
