Country code – MY
Legal Basis – Common law
Legal framework – Labuan Companies Act, 1990 (As amended)
Company form – Private company limited by shares (LTD)
Liability - The liability of the shareholders for the company is limited to the amount of their respective shareholdings.
Share capital – There is no minimum share capital established, and this can be denominated in any currency except Malaysian ringgit (MYR). A Labuan private limited company may be established with US$1 of paid up capital.
Shares may be without par value and may be issued as ordinary shares or preference shares.
Shareholders – Private limited companies may be incorporated by one or more shareholders, who can be either natural or legal persons, residents or non-residents, without limitations. Details of shareholders are not available to the public.
Directors – A private limited company must appoint at least 1 director, who may be a natural or legal person, resident or non-resident, without restrictions. Directors’ details are not disclosed in a public record.
Secretary – A resident secretary is required, who must be a trust officer of a trust company or a Labuan / Malaysian domestic company wholly-owned by a Labuan trust company
Registered Address – A company shall have a registered address and office in Labuan, provided by a Labuan trust company
General Meeting – Annual general meetings are mandatory but can be held anywhere. Meetings can be held by telephone or other electronic means; alternatively, directors, as well as shareholders, may vote by proxy.
Electronic Signature – Permitted.
Re-domiciliation – Inward and outward re-domiciliation is allowed.
Compliance – Companies are obliged to maintain accounting records for 7 years, as well as the supporting documentation.
Companies must file an annual return to the Labuan FSA and tax return to the Inland Revenue Board. Companies are required to file annually audited financial statements.
Appointment of an auditor and file audited financial statements is compulsory for all companies.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Common law Legal basis
- 1 Minimum shareholders
- 1 Minimum directors
- USD 1 Minimum issued capital
- - Minimum paid up capital
- USDAny Capital currency
- Anywhere Location of annual general meeting
- 2018 AEOI
Basis – Companies in Labuan are taxed on a worldwide basis.
Tax rate – Labuan companies are subject to 3% tax on their trading profits arising outside of Malaysia. Certain royalties or income derived from the exploitation of an intellectual property right will be subject to tax under the Malaysian Income Tax Act, rather than under the Labuan tax.
Profits derived from income accrued in Malaysia are subject to Malaysian corporate income tax standard rate, 24%.
Companies may elect to be taxed as Malaysian resident entities to benefit from Malaysian tax treaties that specifically excluded Labuan from treaty benefits.
Tax treaties that exclude Labuan are those concluded with Japan, Netherlands, United Kingdom, Australia, Sweden, Luxembourg, Republic of Seychelles, Chile, Indonesia, South Africa, and South Korea.
Capital gains – Capital gains are not subject to taxation.
Dividends – Dividends received are tax-exempt.
Interests – Interest income is tax-exempt.
Royalties – Royalty income is tax-exempt.
Withholding taxes – There are no withholding taxes in Labuan on dividends, interests, royalties or fees paid to non-residents.
Personal income tax – An individual is tax resident in Malaysia if he or she stays more than 182 days per year in the country.
Both tax residents and non-residents are taxed on income derived from Malaysia. Foreign-source income is usually not subject to taxation.
Personal income tax is levied at progressive rates from 0% to 28% on income exceeding MYR 1,000,000. Non-residents are taxed at a 28% flat rate. Dividends from Malaysian sources are treated as ordinary income, while interests are tax exempt. Both interests and dividends from foreign sources are tax exempt, whether remitted or not.
Capital gains derived from the sale of securities are tax-exempt, those derived from the sale of real properties are subject to the Real Property Gains Tax at rates of 30% for properties held up to 3 years, 20% on the fourth year, 15% on the fifth year and 5% after 5 years.
There is an exemption of 50% of employment income in a managerial capacity with Labuan entity in Labuan, or in a co-located office of marketing office which may be located elsewhere in Malaysia to facilitate business meetings, but cannot be for exercising trading activities on behalf of Labuan entities.
A 100% exemption applies for non-citizens in respect of director’s fees from Labuan entities.
A 65% exemption of the statutory income applies on the provision of qualifying professional (legal, accounting, financial or secretarial) service rendered in Labuan by that company to a Labuan entity.
Other taxes – Labuan has a free-port status, hence indirect taxes do not apply. Stamp duty is exempted on all instruments executed by a Labuan entity in connection with its Labuan business activity.
Exchange controls do not apply to Labuan companies.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 24% Offshore Income Tax Rate
- 24% Corporate Tax Rate
- 0% Capital Gains Tax Rate
- 0% Dividends Received
- 0% Dividends Withholding Tax Rate
- 15% Interests Withholding Tax Rate
- 10% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- Indefinitely Losses carryforward (years)
- FIFO Inventory methods permitted
- 11% Social Security Employee
- 13.00% Social Security Employer
- 28% Personal Income Tax Rate
- 6% VAT Rate
- 73 Tax Treaties
The Federal Territory of Labuan is a federal territory of Malaysia, which comprises the Labuan Island and six smaller islands. It is located off the coast of the state of Sabah in East Malaysia.
It is populated by about 96,800 inhabitants and its capital is Victoria.
Malaysia’s official currency is the Ringgit (MYR) and official languages is Malay, although English is widely spoken.
The island is administered by the federal government through the Ministry of Federal Territories. Labuan Corporation is the municipal government for the island and is headed by a chairman who is in charge of the development and administration of the island.
Labuan has one representative in each of the Lower and Upper Houses of Federal Parliament. Usually, the chairman of the Labuan corporation is the Labuan’s parliament current member.
Labuan is an offshore support hub for deepwater oil and gas activities in the region, as well as a tourist destination and an international financial center.
Labuan is a free trade zone with an export-oriented economy, mainly exporting crude oil, methanol, HBI, gas, flour, animal feed, sea products, and ceramic tiles, which are exported to mainland Malaysia or overseas.
Raw materials, parts, and equipment for industrial uses well as consumer products are imported.
Labuan is also a reputable financial center (Labuan International Business and Financial Centre, LIBFC), currently with more than 300 licensed financial institutions including major leading banks.
Labuan LIBFC is mainly comprised of holding companies, captive insurance, Shariah-compliant Islamic Finance structures, public and private funds, and wealth management.
Tax treaties Map
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