Country: Malaysia - Labuan
Region: Asia Pacific
Currency: Any currency of choice except Malaysian Ringgit (MYR) Languages: English, Malay, Chinese, Tamil
Time Zone: UTC +8
Phone Code: +6087
Communications: Very Good
Labuan is located off the coast of the state of Sabah in East Malaysia and is a Federal Territory of Malaysia. It is also designated as an international business and financial zone by the Malaysian Government since 1990. Known as Labuan International Business and Financial Centre (Labuan IBFC), itpresents a comprehensiveyet cost-efficient midshore solutions and structures toglobal investors and businesses.
The jurisdiction offers the benefits of being in a well-regulated jurisdiction, while provides for fiscal neutrality and certainty, in addition to being an ideal location for substance creation.
Labuan IBFC boasts a wide range of business structures and investment solutions catered to cross-border transactions and international business dealings. It offers services and solutions in niches such as asset leasing, risk management, commodity trading, wealth management, international business companies and Islamic financial services.
It operates within clear and comprehensive legal provisions, guidelines and practice notes, enforced by a single regulator, Labuan Financial Services Authority.
There are three types of Labuan company:-
Labuan Company, Labuan Foreign Company and Labuan Protected Cell Company.
A Labuan company is a company incorporated under the Labuan Companies Act 1990. Companies under this Act are allowed to carry out business in, from or through Labuan in order to enjoy its tax neutrality. A Labuan company may have the following shares structures: company limited by shares; company limited by guarantee; or an unlimited company.
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 activity are not charged tax, i.e. 0%.
- Under Section 3A 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, risk management, fund management, commodity trading,leasing, money broking, credit token business, capital markets, international business companies
Limited companies, public limited companies, branches, trusts, foundations, general partnerships, limited partnerships and protected cell companies
Capital primary business districts:
Labuan and Kuala Lumpur
China, Singapore, Japan, United Kingdom, United States, GCC
Tax Burden - Business:
Tax Burden - Individual:
Labuan trading company 3% of net profits per audited accounts; or MYR20,000 upon yearly election; non-trading 0%
Albania, Argentina, Austria, Australia, Bahrain, Bangladesh, Belgium , Bosnia, Brunei
Herzegovina, Canada, Chile, China,Crotia, Czech Republic, Denmark, Egypt, Fiji, Finland, France,Germany, Hong Kong, Hungary, India, Indonesia,Iran, Ireland, Italy, Japan, Jordan, Kazakhstan, Korea,Kuwait,Kyrgyz, Laos,Lebanon, Luxembourg, Myanmar, Malta, Mauritius, Mongolia, Morocco,Namibia, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Qatar, Romania, Russia, San Marino, Saudi Arabia, Seychelles, Singapore, Slovak Republic, South Africa, Switzerland,Syria,Thailand,Turkey,Turkmenistan,UAE, United Kingdom, USA,Uzbekistan, Venezuela, Vietnam,Zimbabwe