Currency: Any currency of choice except Malaysian Ringgit (MYR) Languages: English, Malay, Chinese, Tamil
Time Zone: UTC +8
Phone Code: +6087
Communications: Very Good
Although Labuan is part of Malaysia, it has its own offshore regime. Labuan companies can make use of Malaysia's extensive double tax treaty network, and as a result the island has become a preferred conduit for FDI to a number of ASEAN countries. A stock exchange aimed primarily at the listing of Islamic financial debt issues has had considerable successes. Offshore companies engaged in trade pay 3% tax or can elect to pay a fix sum of MYR20,000 (approx. US$6,500); all other offshore companies are exempt. There are many incentives and exemptions which make it possible for most mainland Malaysian profits to be repatriated tax-free through Labuan. LabuanFinancial Services Authority has built an e-commerce infrastructure which can be used by incoming e-commerce operations and new financial markets.
Labuan Offshore Companies
There are three types of offshore companies in Labuan: Labuan Company, Labuan Foreign Company and Labuan Protected Cell Company.
Residents and non-residents of Malaysia are allowed to establish Labuan companies. Under Section 7(5) of theLabuan Companies Act 1990 (LCA 1990), a Labuan company is allowed to deal with a resident subject tonotification to Labuan Financial Services Authority (Labuan FSA).
Companies incorporated in Labuan IBFC may enjoy:
- Access to Malaysia’s Double Tax Agreements with over 80 countries
- A competitive tax regime Labuan business activities as defined in the Labuan Business Activity Tax 1990 (LBATA1990) which provides:
- Taxation of 3% of net audited profits or a flat rate of MYR20,000 to be elected yearly, if the company isundertaking trading activities.
- Companies carrying a non-trading activities is not charged tax, i.e. 0%.
- Under Section 3A1 of the LBATA 1990, a company can elect to be taxed under the Malaysia Income Tax Act1967, i.e. subject to corporate tax rate of 20% (on the first MYR500,000) and thereafter 24%.
- A summary of the description of Labuan business activities and its tax treatment is shown in the following table:
Description of Labuan Activities
Labuan non-trading activity
Holding of investments in securities, stock, shares,loans, deposits or any other properties held by aLabuan entity on its own behalf
Not subject to tax
Labuan trading activity
Includes banking, insurance, trading, management,shipping operations, licensing or any other activitywhich is not a Labuan non-trading activity
3% of net profits per audited accounts; orMYR20,000 upon yearly election
Carrying out both Labuan trading and
- Deemed to be Labuan trading activity
Same tax treatment as Labuan trading activity(3% of net profits per audited accounts orMYR20,000 upon yearly election)
Non-Labuan business activities
Taxed under domestic or Malaysia Income Tax Act1967 — 24%
Wealth Management, Banking, Insurance, Fund Management, Shipping, Aviation, Trading Goods, Trading Financial, Intellectual Property/Licensing, Holding Companies
Limited companies, public limited companies, branches, trusts, foundations, general partnerships, limited partnerships and protected cell companies
Capital primary business districts:
Labuan Town, Kuala Lumpur
China, Indonesia, Japan, Singapore, Hong Kong, United States. United Kingdom,
Tax Burden - Business:
Tax Burden - Individual:
Offshore trading company 3% of net profits per audited accounts; or MYR20,000 upon yearly election; non-trading 0%)
Albania, Australia, Austria, Bahrain, Bangladesh, Belgium, Brunei, Canada, Chile, China, Croatia, Czech Republic, Denmark, Egypt, Fiji, Finland, France, Germany, Hong Kong, Hungary, IndiaIndonesia,Iran, Ireland, Italy, Japan, Jordan, Kazakhstan, Korea, Republic of, Kuwait, Kyrgyzstan, Laos, Lebanon, Luxembourg, Malta, Mauritius, Mongolia, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Qatar, Romania, Russia, San Marino, Saudi Arabia, Seychelles, Singapore, South Africa, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syria, Taiwan, Thailand, Turkey, Turkmenistan, United Arab Emirates, United Kingdom, Uzbekistan, Venezuela, Vietnam, Zimbabwe