Labuan Structures
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Overview
With Labuan IBFC’s strategic location in the heart of Asia, it is only natural for many Asian firms to opt Labuan as their domicile. Being close to their home markets as well as located in the same time zone with other major cities in the region, businesses in the Centre can be transacted more conveniently and at competitive costs compared to other markets. Labuan companies also have the added advantage of being able to establish offices anywhere outside of Labuan, provided it meets the substantial activity requirements. Incorporation of Labuan companies in Labuan IBFC is required to be undertaken through a Labuan trust company, which will conduct due diligence on the prospective client. On-line company registration will be done via COR@L System that provides convenience and security to its users with real-time access.
Application Procedure
Applicant must appoint a licensed Labuan trust company as its incorporation agent.
Frequently Asked Questions
Incorporation of a Labuan company in Labuan IBFC must be done through a Labuan trust company. The application should be submitted together with the Memorandum and Articles of Association, consent letter to act as director, statutory declaration of compliance as well as payment of registration fees based on paid-up capital.
Labuan trading activity includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity.
Labuan non-trading activity means an activity relating to the holding of investments in securities, stocks, shares, loans, deposits or any other properties situated in Labuan by a Labuan entity on its own behalf.
Labuan business activities is defined as a Labuan trading or non-trading activity carried on in, from or through Labuan, excluding any activity which is an offence under any written law.
The rate of tax imposed is 3% of audited net profits for trading activity and zero percent for non-trading activity, provided that the Labuan entities are in compliance with the tax substantial activity requirements.
A Labuan company can elect to be taxed under ITA, pursuant to Section 3A of Labuan Business Activity Tax Act 1990 (LBATA).
A tax rebate is granted to a Labuan company for each year of assessment for any business zakat which is paid in the basis period for that year of assessment to, and evidenced by a receipt issued by, a Labuan Islamic religious authority.
However, where the total amount of the rebate exceeds the tax charged (before any such rebate) for any year of assessment, the excess is not refunded or is available as a credit to set off his tax liability for that year of assessment or any subsequent year.
The tax incentives for Labuan IBFC apply to all types of Labuan entities as prescribed under the Labuan Business Activity Tax (Requirement for Labuan business activity) regulations 2018.
In addition to the numerous tax incentives accorded for Labuan IBFC, the unique features of Labuan tax regime are:
Investment companies usually only "hold" assets, or shares in companies located in other jurisdictions. Trading companies are defined as those which actually carry out business on a day to day basis.
A minimum of one share is required. Apart from this there is no minimum capital requirement, and Labuan companies may issue shares of different classes and of different rights but no bearer shares are allowed. Shares may be denominated in any currency except in Malaysian Ringgit.
The minimum number of shareholders in an offshore company is one (1). The shareholder may be an individual, a corporation or a trust company holding the shares as a nominee, or on trust.
A Labuan company is required to maintain proper accounting and other records in Labuan, and those proper accounting and other records shall be kept at the registered office of the company or other places in Labuan. Such accounting and other records shall be open at all times for inspection by a director of the offshore company.
A Labuan company must have at least one director who can act as a resident director and a resident secretary.
In order for Labuan company to avail for Labuan IBFC tax incentive, Labuan company is required to have physical office with adequate number of full time employees in Labuan and adequate amount of annual operating expenditure as prescribed under the Labuan substance regulations.
Labuan company can open foreign accounts with any banks in Labuan or outside Labuan. However, the account name must be the Labuan company name.
The operations of Labuan companies in Labuan IBFC are completely free from exchange control regulations when dealing with non-residents.
The Labuan Pre-Incorporated Company (LPC) is basically a normal Labuan company that is incorporated through normal approach but owned but Labuan trust companies (LTC). This is new initiative introduced by Labuan FSA to allow LTC to pre-incorporate a Labuan Company and make it available to investors who are keen to purchase a ready-made company in Labuan.
Labuan company is governed by Labuan Companies Act 1996.
What You Need to Know
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