Frequently Ask Questions (FAQs)
SHORT FORMS :
AMLAPUA: Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001
LC: Labuan Company
FLC: Foreign Labuan Company (Branch)
LFSA: Labuan Financial Services Authority
LCA: Labuan Companies Act 1990
LCA
LC and FLC.
The LC can be in the form of:
company limited by shares;
company limited by guarantee; and
unlimited company.
Not permitted
LC: Minimum one share for non-licensed entities. For licensed entities, the issued capital requirement depends on type of licence.
FC: Dependent on its place of incorporation.
| Authorised Capital (equivalent in foreign currency) | Fee |
|---|---|
| LC | |
| Up to RM50,000 | USD300 |
| Between RM50,000 - RM1 Million | USD600 |
| Over RM1Million | USD1,500 |
| Lodgement of M&A | NIL |
| Incidental filing fees | USD100 - 200 |
| FLC | |
| Registration | USD2,000 |
| Incidental filing fees | USD100-200 |
LC: USD 800
FLC: USD1,500
Licensed entities pay additional fees
For Labuan entities carrying on Labuan trading activities which comply with the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 (Substance Regulations 2021
) in respect of the minimum number of full-time employees and minimum amount of operating expenditure in Labuan the tax payable is 3% on net audited profits.
For a Labuan entity carrying on investment holding activities related to non-pure equity holding, it should employ a minimum of 2 full-time employees and incur minimum of RM20,000 annual operating expenditure in Labuan in order for it to be exempt from tax.
For Labuan entities carrying on investment holding activities related to pure equity holding, it would not have to employ any full-time employee but should incur RM20,000 annual operating expenditure in Labuan in order to qualify under the Substance Regulation 2021. However the said pure equity holding Labuan entity must comply with any condition in relation to control and management in Labuan.
For Labuan entities, whether carrying on Labuan trading or Labuan non trading business that do not comply with the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 (“Substance Regulations 2021) the tax payable would be 24% on the net audited profits.
Labuan entities carrying on both Labuan trading and Labuan non-trading activities are deemed to be carrying on trading activities taxed accordingly.
Labuan entities carrying on activities which are not listed under Substance Regulations 2021 would be taxed under the Malaysian Income Tax Act, 1967 (ITA
).
Labuan entities may elect to be taxed under the ITA to secure more certainty to Malaysia's treaty benefits. Such election shall be irrevocable
The services of a Labuan trust company are required to incorporate the Labuan entity and for statutory filings of the Labuan entity. An officer, who is an approved officer of a Labuan trust company or a subsidiary company wholly owned by the Labuan trust company, must be appointed as the Resident Secretary of the Labuan company.
No, this is almost made redundant by the fact that Labuan companies can be incorporated within one to three working days if all due diligent requirements relating to AMLAPUA are satisfied.
No, this is almost made redundant by the fact that Labuan companies can be incorporated within one to three working days if all due diligent requirements relating to AMLAPUA are satisfied.
No, this is almost made redundant by the fact that Labuan companies can be incorporated within one to three working days if all due diligent requirements relating to AMLAPUA are satisfied.
No, this is almost made redundant by the fact that Labuan companies can be incorporated within one to three working days if all due diligent requirements relating to AMLAPUA are satisfied.
One member who can either be an individual or a corporate entity.
Must be the principal office of a Labuan trust company.
Minimum one director who can either be an individual or a corporate entity. One resident secretary (see no. 9) must be appointed. Additional secretaries may be appointed.
There is no requirement as to the location of meetings. The LCA permits members’ resolutions to be passed by circulation or other electronic means.
Annual returns must be filed not later than 30 days prior to the anniversary of the date of incorporation.
Required for licensed entities, those making public offerings and entities complying with the Substance Regulations 2021 (see no. 8).
Accounts not required to be filed with annual returns. However, if the members of a Labuan company adopt audited accounts then it is necessary to file the same with LFSA (see no. 17).
No exchange controls on foreign currency transactions. Labuan entities are allowed to carry on business with Malaysian residents and in Ringgit Malaysia subject to Income Tax (Deductions Not Allowed for Payment Made to Labuan Company by Resident) Rules 2018 (Amendment) 2020 (ND Rules 2020
)
The following types of payment made by a resident will not be allowed for deduction under Section 39(1)(r) of the ITA when computing for the Malaysian resident entity's income tax liability:
| No | Type of Payment | Amount not allowed for deduction |
|---|---|---|
| 1 | Interest payment | 25% (including all payments relating to financing e.g. commission, facility & upfront fees) |
| 2 | Lease rental | Other payments 97% of the amount of payment |
| 3 | Other payments | 97% of the amount of payment |
In addition, the ND Rules 2020 are not applicable to the following:
(a) Transactions between Labuan International Commodity Trading Company (LITC) and Malaysian residents;
(b) Transactions between Labuan entities that have opted to pay tax under Income Tax Act 1967 (ITA) and Malaysian residents; and
(c) Transactions between Labuan entities that are paying taxes under ITA and Labuan entities that are paying taxes under Labuan Business Activity Tax Act 1990 whether the LE had complied with the SR or not.
Provided for in the LCA through registration and approved by members, creditors and debenture-holders, and the authorities of both jurisdictions.
Malaysia has signed more than sixty double-tax agreements with its trading partners, most of which also apply to Labuan except 10.
Range of Fees
Incorporation: USD700 - USD1,200
Annual Management Fee: USD500 - USD1,500
Nominee Shareholder: USD200 - USD500
Opening of bank accounts: USD500 - USD2,000
Other services depending on time and skills involved