Private company limited by shares
Labuan, a federal territory of Malaysia, has established itself as a specialized jurisdiction for offshore and international business through a distinct legal and regulatory framework. Companies incorporated in Labuan are governed by the Labuan Companies Act 1990, which provides for corporate flexibility, tax efficiency, and access to Malaysia’s broader financial ecosystem.
A Labuan company limited by shares is the most common vehicle used in the jurisdiction. Ownership is divided into shares, and there are no nationality or residency restrictions on shareholders. This open structure makes Labuan companies suitable for both local and international investors.
For companies not engaged in regulated sectors, there is no minimum share capital requirement beyond the issuance of at least one share. This can be a par value share (e.g., USD 1) or a no-par value share priced similarly. Companies involved in regulated activities, such as financial services, may be subject to specific capital requirements imposed by the Labuan Financial Services Authority (Labuan FSA).
- Share capital may be denominated in any currency, and different classes of shares can be issued to assign distinct rights concerning:
- Dividend distribution;
- Voting rights and participation in shareholder meetings;
- Entitlements upon liquidation;
- Other preferential or restrictive rights.
The company is managed by a Board of Directors, appointed by shareholders. The board must include at least one individual director, although additional directors may be individuals or corporate entities. Directors hold the authority to represent the company and execute contracts.
Labuan companies are also required to appoint a resident corporate secretary, which must be a licensed trust or corporate service provider located in Labuan. Additionally, the company must have at least one resident director. Notably, the resident director does not need to physically reside in Labuan or Malaysia.
To qualify as a resident director, a person must:
- Be at least 18 years old and legally competent;
- Not be a citizen of Israel or North Korea;
- Not appear on sanctions lists issued by the United Nations or Malaysian authorities;
- Not be disqualified under Section 90 of the Labuan Companies Act.
A qualified trust officer employed by a licensed Labuan trust company may also serve in this role.
A Labuan company is considered tax resident in Labuan if its place of effective management and control is located in the territory. The tax treatment of Labuan companies depends on whether the company conducts a Labuan business activity or engages in other forms of business subject to Malaysia’s standard tax laws.
Labuan companies conducting qualifying business activities benefit from a concessionary corporate tax rate of 3% on net audited profits. These activities include a wide range of financial and trading services, such as:
- Insurance and reinsurance (including takaful operations);
- Banking and investment banking;
- Commodity trading;
- Leasing;
- Fund management and securities dealing;
- Trust company services;
- Holding companies and administrative services;
- Accounting, legal, and back-office support.
To retain eligibility for this reduced rate, companies must meet economic substance requirements. These include employing a minimum number of full-time staff in Labuan and incurring an adequate level of operating expenditure, both of which vary depending on the nature of the activity. For many entities, the baseline is two employees and MYR 50,000 in local expenses.
Dividends and capital gains arising from Labuan business activities are typically not subject to further taxation.
Labuan companies are subject to annual filing and audit requirements. These include:
- Annual Return: Must be submitted to Labuan FSA within 30 days of the company’s incorporation anniversary.
- Tax Return: Filed with the Inland Revenue Board by 31 March following the end of the assessment year. Extensions may allow filing by 31 July.
- Audited Financial Statements: Required to be filed within six months of the financial year-end.
Labuan companies offer a flexible and cost-effective corporate structure within a well-regulated framework that supports a wide range of cross-border business activities. The jurisdiction’s concessionary tax regime, supported by economic substance compliance, is particularly attractive for entities engaged in financial, trading, and administrative services. However, businesses must carefully evaluate whether their activities fall under the scope of Labuan Business Activity, as this distinction fundamentally impacts tax obligations.
Labuan continues to serve as an effective platform for international business with access to Malaysia’s legal, financial, and logistical infrastructure—provided that companies comply with its evolving regulatory landscape.
Legal *
Country code – MY
Legal Basis – Common law
Legal framework – Labuan Companies Act (As amended)
Company form – Private company limited by shares (LTD)
Liability - The liability of the shareholders for the company is limited to the unpaid amount of their respective shareholdings.
Economic Substance - Companies carrying on a "Labuan Business Activity" must comply with economic substance requirements to qualify for a 3% corporate tax. Such substance requirements include being directed and managed in or from within Labuan, conduct the core income-generating activities in Labuan, have physical premises in Labuan and have an adequate number of Labuan employees and local Labuan expenditure - which is determined depending on the specific activity, starting at two employees and RM 50,000 minimum local expenditure.
Share capital – There are no minimum share capital requirements.
Shareholders – Labuan 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 Labuan company must appoint at least 1 director. Directors may be a natural or legal persons, resident or non-resident (other than the resident director). A Labuan company must have a director who qualifies as "resident director". The following persons qualify as resident director:
- a trust officer of a Labuan trust company approved by Labuan FSA under the Labuan Financial Services and Securities Act 2010 made available by the Labuan trust company to be appointed as a resident director; or
- any natural person who
- has attained the age of eighteen years old;
- has full legal capacity;
- has consented to the appointment as a resident director, and fulfil the following requirements:
- is a citizen of any country except citizen of Israel and Democratic People’s Republic of Korea (North Korea);
- is not listed as sanctioned individuals in the United Nations Security Council Resolutions (UNSCRs) lists i.e. UNSCR 1267(1999), 1373(2001), 1988(2011), 1989(2011), 2253(2015), 1718(2006), 2231(2015) also the Ministry of Home Affairs List i.e. List of entities determined by the Minister of Home Affairs under section 66B(1) of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 as published in its website and any other list as Labuan FSA may adopt and issue; and
- is not a disqualified person pursuant to section 90 of the Labuan Companies Act
- 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.
All Labuan companies must file an annual return to the Labuan FSA and tax return to the Inland Revenue Board. Companies are required to file annually an auditor report with audited financial statements.
The tax return must be filed by 31 March for the previous tax year. An extension may be requested, and in such case, the filing would need to be done by 31 July.
The annual return must be filed no later than 30 days from the anniversary of the registration date.
The auditor report and financial statements must be submitted within 6 months from financial year-end.
- 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 *
- - Minimum issued capital *
- - Minimum paid up capital *
- USDAny Capital currency *
- Anywhere Location of annual general meeting *
- 2018 AEOI *
Taxes *
Corporate Income Tax – Taxes levied to a Labuan company largely depend on whether the company carries on a "Labuan Business Activity" or a "Non-Labuan Business Activity"
- Labuan insurer, Labuan
reinsurer, Labuan takaful operator, Labuan retakaful operator - Labuan underwriting manager or Labuan underwriting takaful manager
- Labuan insurance manager or Labuan takaful manager
Labuan insurance broker or Labuan takaful broker - Labuan captive insurer or Labuan captive takaful
- Labuan International Commodity Trading Company
- Labuan bank, Labuan investment bank, Labuan Islamic bank or Labuan Islamic investment bank
- Labuan trust company
- Labuan leasing company of
Labuan Islamic leasing company - Labuan development finance company or Labuan
Islamic development finance company - Labuan building credit company or Labuan
Islamic building credit company - Labuan factoring company or
Labuan Islamic factoring company - Labuan money broker or Labuan Islamic money broker
- Labuan fund manager
- Labuan securities licensee or Labuan Islamic securities licensee
- Labuan fund administrator
- Labuan company management
- Labuan International Financial Exchange
- Self-regulatory organisation or Islamic self-regulatory organisation
- Holding Company (tax exempt)
- Administrative, accounting and legal services including backroom processing, payroll services, talent management, agency services, insolvency related services and management services.
- with paid-up capital of 2.5 million Malaysian ringgit (MYR) or less, and gross income from business of not more than MYR 50 million.
- that does not control, directly or indirectly, another company that has paid-up capital of more than MYR 2.5 million, and
- is not controlled, directly or indirectly, by another company that has paid-up capital of more than MYR 2.5 million.
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.
Withholding taxes – There are no withholding taxes in Labuan on dividends, interests, royalties or fees paid to non-residents.
Employment Income - 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.
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.
- 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 * *
- 3% Offshore Income Tax Rate *
- 3% 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 *
Country details *
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.