Doing Business in Labuan
Summary of Quick Facts
92 sq. km.
95,500 comprising of a mix of Malays (50%),Chinese (40%), Indians and the indigenous people of Sabah & Sarawak, East Malaysia.
Malay is the national language but English is commonly spoken.
Malaysian Ringgit (MYR).
Oil and Gas, Business and Financial Services.
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) 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 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
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:
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:-
Islamic Republic of Iran
Bosnia & Herzegovina *
Papua New Guinea
China, People’s Republic
United Arab Emirates
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:-