News / Introducing a new jurisdiction: Labuan
The Federal Territory of Labuan is part of Malaysia and comprises sever small islands. Labuan lies off the north-west coast of Borneo and is 8km away from the Malaysian state of Sabah. Labuan is located on the major shipping and air routes of the Asian Region. The island covers an area of approximately 92 sq km and has a population of about 78.000.  

The nation is economically strong and politically stable. Labuan has been developing as an international financial centre during the last twenty-five years. Under the guidance of LOFSA (the Labuan Offshore Financial Services Authority), the Malaysian authorities have invested heavily into the development of Labuan’s physical infrastructure and economic expansion.

The Malaysian legal system is based on the English model, wish special laws enacted and applicable to the offshore industry. Launched in 2010 Labuan has its own legislation and tax regime to enhance the competitiveness of the Labuan International Business and Financial Centre (IBFC). The IBFC offers a wide range of financial products and services and is a modern comprehensive solution striking the ideal balance between client confidentiality and stringent compliance as business transactions and practices are conducted in accordance with the international standards and practices.

Labuan offers a business friendly environment, a simple and attractive tax system, modern and internationally recognised legal framework which is enforced by its regulator, the Labuan Financial Services Authority (FSA). As a well-regulated jurisdiction, Labuan IBFC remains compliant to all international protocols on exchange of information. The island is not on any black list by international organisations or other countries.

Tax incentives of Labuan:
  •          No tax on investment income
  •          No inheritance tax
  •          No withholding tax
  •          No stamp duties
  •          No turnover tax
  •          Labuan taxpaying companies can benefit from Malaysia’s network of over 70 tax treaties
More precisely, the corporate taxation of Labuan International Companies applies as follows:
  •        For inactive (dormant) companies: no tax and no audit report requirements  
  •        For investment holding companies: no tax and no audit report requirements
  •        For trading, import and export companies: tax 3% on net profit with audit report requirement
  •        For trading company: option to opt in to a lump sum of RM20.000 (USD$7.500) tax and no audit report requirement
Corporate requirements:

A licenced agent and registered office is required, as well as a resident company secretary which must be a trust officer of a trust company. The minimum number of directors is one. Corporate directors are allowed and can be of any nationality and do not need to be residents of Labuan or Malaysia. A minimum of one shareholders is required.

Financial Statements Requirements:

A set of accounting records must be kept in Labuan. 

A trading company, which pays 3% of audited net profits is required to appoint an auditor and file audited financial statements.

However if a trading company choses to pay the tax of RM20.000, they are not required to file financial statements as such companies are exempt from appointing an auditor.

A non-trading company is not required to appoint an auditor not file audited financial statements.

Interested in incorporating a company in Labuan? We encourage our clients to contact us for a complimentary consultation with no obligation. Contact us today and our experienced consultants will gladly advise:

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