Summary of Quick Facts
|Location||8km off the coast from the state of Sabah, EastMalaysia, on the island of Borneo.|
|Land Area||92 sq. km.|
|Time Zone||GMT + 8 Hours.|
|Climate||Tropical weather with an average 30℃.|
|Population||95,500 comprising of a mix of Malays (50%),Chinese (40%), Indians and the indigenous people of Sabah & Sarawak, East Malaysia.|
|Language||Malay is the national language but English is commonly spoken.|
|Currency||Malaysian Ringgit (MYR).|
|Legal System||English Common law, British Legal System.|
|Economic Sector||Oil and Gas, Business and Financial Services.|
|Accessibility||Several daily flights to Kuala Lumpur and Kota Kinabalu with connection to USA, Europe, Asia and Australia.|
Businesses in Labuan are regulated by modern Acts. These Acts enhance its competitiveness in the offering of financial product and services.
Labuan IBFC also adheres to international standards and best practices including anti money laundering and exchange information set by the
Organisation of Economic Cooperation and Development. Acts which govern the businesses in Labuan as follows:-
- Labuan Business Activity Tax Act 1990 (“LBATA”)
- Amendment to the Labuan Business Activity Tax Act (Finance Bill 2018)
- Labuan Companies Act 1990
- Labuan Trusts Act 1996
- Labuan Financial Services Authority Act 1996
- Labuan Financial Services and Securities Act 2010
- Labuan Islamic Financial Services and Securities Act 2010
- Labuan Foundation Act 2010
- Labuan Limited Partnerships and Limited Liability partnerships Act 2010
Labuan companies can trade in any currencies with any countries.
Labuan Companies Characteristics
I. Under the Labuan Companies Act 1990, the name of the company may have the word “ (L) “ as part of its name and shall also have the word:
- “Bhd” or “Berhad”, where the company name shall in addition have the word “(L)” or “(Labuan)”;
- “Corporation” or “Corp”;
- “Incorporated” or “Inc”;
- “Limited” or “Ltd”;
- “Public Limited Company” or “PLC”;
- “Societe Anonyme” or “Sociedad Anonima” or “S.A”;
- “Aktiengesellschaft” or the abbreviation “A.G”;
- “Naamloze Vennootscap” or the abbreviation “N.V”;
- “Perseroan Terbatas” or the abbreviation “P.T”.
II. The words “Royal”, “Bank”, “Finance”, “Fund” or “Trust” shall be avoided, except for specific business activities which required the corresponding licence(s).
- Share capital can be held in any currencies.
- No par value and treasury shares are allowed.
At least one (1) shareholder who can be either individual or corporate.
- At least one (1) Director who can be either individual or corporate.
- The Director(s) can be either a non-resident or resident of Malaysia.
The company must have a resident secretary which can be either individual or corporate.
The company must have a registered office in Labuan.
An annual must be filed not later than 30 days from the anniversary of the date of its incorporation.
Maintain Proper Accounting Records
The Labuan company is subject to audit.
Tax return must be filed within a periods of three (3) months.
An annual government fee is payable within 30 days immediate after the anniversary date of its incorporation.
Labuan Taxable Activities
With effect from 1 Jan 2019, under Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulation 2018, a Labuan company carrying on a Labuan business activity is only subject to tax at the rate of 3% of net profit PROVIDED that it has fulfilled the requirement of the number of full time employees and an amount of annual operating expenditures as specified in the Schedule below:
|Labuan Company Carrying on a Labuan Business Activity||Minimum Number of Full Time Employees in Labuan||Minimum Amount of Annual Operating Expenditure in Labuan RM|
|Labuan Insurer, Labuan reinsurer, Labuan takaful operator or Labuan retakaful operator||4||150,000|
|Labuan underwriting manager or Labuan underwriting takaful manager||4||100,000|
|Labuan insurance manager or Labuan takaful manager||4||100,000|
|Labuan insurance broker or Labuan takaful broker||4||100,000|
|Labuan captive insurer or Labuan captive takaful||4||100,000|
|Labuan International Commodity Trading Company||3||3,000,000|
|Labuan bank, Labuan investment bank, Labuan Islamic bank or Labuan Islamic investment bank||3||180,000|
|Labuan trust company||3||120,000|
|Labuan leasing company or Labuan Islamic leasing company||2||100,000|
|Labuan credit token company or Labuan Islamic credit token company||2||100,000|
|Labuan development finance company or Labuan Islamic development finance company||2||100,000|
|Labuan building credit company or Labuan Islamic factoring company||2||100,000|
|Labuan factoring company or Labuan Islamic factoring company||2||100,000|
|Labuan money broker or Labuan Islamic factoring company||2||100,000|
|Labuan fund manager||2||100,000|
|Labuan securities licensee or Labuan Islamic securities license||2||100,000|
|Labuan fund administrator||2||100,000|
|Labuan company management||2||100,000|
|Labuan International Financial Exchange||2||120,000|
|Self-regulatory organisation or Islamic self-regulation organisation||2||120,000|
Income derived from intellectual property rights is subject to tax at the rate of 24% under the Income Tax Acts (“ITA”).
With effect from 1 Jan 2019, under Income Tax (Deductions Not Allowed for Payment Made to Labuan Company by Resident) Rules 2018, the following type of payments made to a Labuan company by a company resident in Malaysia are not entitled to a tax deduction:
|Type of payment||Amount not allowed for deduction|
The source of income is exempted from income tax as follows:-
- Dividend paid out of the income derived from the Labuan Business Activities is not subject to tax.
- Interest or technical and management fee paid by a Labuan company to a non-resident person or a resident person or another Labuan company is not subject to withholding tax.
Tax Incentives (until to Year of Assessment 2020)
- Tax exemption on Director fees received by a non-citizen individual in his capacity as a Director of a Labuan company.
- Tax exemption on 50% of gross income received by a non-citizen individual from exercising employment in Labuan with Labuan company in managerial function in Labuan or at its marketing or co-located offices approved by Labuan Financial Services Authority.
- Tax exemption on 50% of gross housing and Labuan territory allowances received by Malaysian citizen from exercising employment in Labuan with a Labuan company.
Stamp Duty Exemption
The following activities are exempted from stamp duty:-
- All Memorandum and Articles of Association of a Labuan company.
- All instrument executed by a Labuan company in connection with a Labuan business activities, including transfer of shares in a Labuan company.
Double Taxation Agreements
Malaysia has entered into Double Taxation Agreements with various countries as follows:-
|Albania, Republic||Germany||Mongolia||South Africa|
|Argentina ^||Hong Kong||Morocco||Spain|
|Belgium||Islamic Republic of Iran||Norway||Switzerland|
|Bosnia & Herzegovina *||Italy||Pakistan||Syria|
|Brunei||Japan||Papua New Guinea||Taiwan #|
|China, People’s Republic||Korea, Republic||Qatar||Turkmenistan|
|Croatia||Kuwait||Romania||United Arab Emirates|
|Czech Republic||Kyrgyz, Republic||Russia||United Kingdom|
|Denmark||Laos||San Marino||United States of America ^|
* Gazette Double Taxation Agreements
^ Limited Agreements
# Income Tax Exemption Order
Currently, Labuan has been specifically excluded from Double Taxation Agreement with the countries as follows:-