Incorporation of Labuan Company

A Labuan company is a company incorporated under the Labuan Companies Act 1990 (LCA), that may participate in business activities and enjoy attractive tax benefits provided under the Labuan Business Activity Tax Act 1990 (LBATA).

It may carry out any business that is permitted in Malaysia in, from or through Labuan, including trading and investment activity.

Labuan investment activity is defined as an activity relating to the holding of investments in securities, stocks, shares, loans, deposits or any other properties held by a Labuan entity on its own behalf.

Labuan trading activity includes banking, insurance, trading, management, licensing, shipping operations or any other activity.

A Labuan company would need to be licensed if it intends to undertake specific businesses as defined under the Labuan Financial Services and Securities Act 2010 (LFSSA) or the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA), which may include the banking, insurance/insurance-related, fund management, leasing, factoring and company management businesses.

Residents and non-residents of Malaysia are permitted to establish Labuan companies. Section 7(5) of LCA allows a Labuan company to deal with a resident subject to the filing of notification to Labuan FSA within 10 working days of the transaction.

Business transactions of Labuan companies must be made in currencies other than the Malaysian Ringgit, except for the purpose of defraying administrative and statutory expenses as well as receiving fees and commissions.

Labuan companies can own controlling stakes in a Malaysian domestic company and are also allowed to undertake shipping operations with non-residents.

A summary of the description of Labuan business activities and its tax treatment is shown in the following table:

Description Tax Treatment
Labuan Investment Activity Holding of investment securities, stock, shares, loans, deposits or any other properties held by a Labuan entity on its own behalf./td> Not subject to tax
Labuan Trading Activity Includes banking, insurance, trading, management, shipping operations, licensing or any other activities. 3% of net profits per audited accounts
Carry out both Labuan Trading and Investment Activities Deemed to be Labuan Trading Activity Same tax treatment as Labuan Trading Activity: 3% of net profits per audited accounts
Non-Labuan Business Activities Tax under domestic income tax act – 25% (YA2014)

Should a Labuan company or structure prefer not to be taxed under LBATA, it may make an irrevocable election to be taxed under the Income Tax Act 1967 (ITA).


Registration Requirement

The LCA requires a Labuan company to employ the services of a trust company to act as its incorporation agent. The services offered by a trust company include, but are not limited to, the following:

  1. Provides the registered office and resident secretary.
  2. Performs the secretarial duties of the Labuan company including lodgement of any documents required under the LCA.
  3. Makes available any of its trust officers for appointment as resident director and resident secretary.


Characteristics of a Labuan Company

  1. Number of Directors and Shareholders
    • Must have at least one director and one shareholder
    • The director and shareholder can be the same person
  2. Share Capital
    • In any currencies except Ringgit Malaysia
    • Minimum one share with no minimum share per value
  3. Company Secretary
    • Must have at least one resident secretary which shall be a Labuan Trust Company
  4. Registered Office
    • Must have a registered office which shall be the principal office of a Labuan Trust Company
  5. Accounting Requirement
    • The audit requirements and filing are only required for Labuan companies opting to pay tax at 3% p.a. on the audited net profits and also, licensed companies
    • Under the LCA 1990, there are no publicly accessible records

Set Up a Marketing Office

A Labuan trading company may apply to Labuan FSA to establish marketing offices outside of Labuan Island and within Malaysia, to carry out its marketing activities without losing its Labuan business activity status.

A Labuan holding company may apply to Labuan FSA to co-locate its operational and management office in Kuala Lumpur, provided it makes an irrevocable election to be taxed under ITA instead of LBATA.

With the exception of insurance brokers and captives, all Labuan companies with such a marketing or co-located office are required to maintain a management office in Labuan.

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