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labuan

labuan

Country:                     Labuan

Region:                       AsiaPacific

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

Tax Treatment

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

non-trading activities

- 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%

 

 

 

 

Suitable for:

Wealth Management, Banking, Insurance, Fund Management, Shipping, Aviation, Trading Goods, Trading Financial, Intellectual Property/Licensing, Holding Companies

 

Vehicle Types:

Limited companies, public limited companies, branches, trusts, foundations, general partnerships, limited partnerships and protected cell companies

 

Capital primary business districts:

Labuan Town, Kuala Lumpur

 

Good Relationships:

China, Indonesia, Japan, Singapore, Hong Kong, United States. United Kingdom, 

 

 

Tax Burden - Business:

Very Light

 

Tax Burden - Individual:

Light

 

Tax rate:

Offshore trading company 3% of net profits per audited accounts; or MYR20,000 upon yearly election; non-trading 0%)

 

Treaty Jurisdictions:

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

 

TIEA Jurisdictions:

Bermuda

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