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Labuan

2020

Country: Labuan

Region: Asia Pacific

Currency: No Restriction on Currency

Languages: English, Malay, Chinese, Tamil

Time Zone: UTC +8

Phone Code: +6087 591 200

Communications: Very Good

Labuan, being part of Malaysia，plays a significant role as the window to Asia’s economy. Labuan companies can make use of Malaysia's extensive double tax treaty network, and as a result the island has become a preferred conduit for FDI to a number of ASEAN countries. A stock exchange aimed primarily at the listing of Islamic financial debt issues has had considerable successes. Labuan companies engaged in trade pay 3% tax; there is currently no tax imposed on a Labuan entity conducting non-trading activities. There are many incentives and exemptions which made Labuan as an ideal destination for business friendly environment and tax planning. Labuan Financial Services Authority continues to welcome new business opportunity including Fintech related businesses.

Labuan Companies

There are three types of companies in Labuan IBFC: Labuan Company, Labuan Foreign Company and Labuan Protected Cell Company.

Companies incorporated in Labuan IBFC may enjoy:

Access to Malaysia’s Double Tax Agreements with over 80 countries
A competitive tax regime Labuan business activities as defined in the Labuan Business Activity Tax 1990 (LBATA 1990) which provides:
Taxation of 3% of net audited profits if the company is undertaking trading activities.
Companies carrying a non-trading activities is not charged tax, i.e. 0%.
Under Section 3A(1) of the LBATA 1990, a company can elect to be taxed under the Malaysia Income Tax Act 1967, i.e. subject to corporate tax rate of 20% (on the first MYR500,000) and thereafter 24%.
Exemption of withholding tax
A summary of the description of Labuan business activities and its tax treatment is shown in the following table:

Description of Labuan Activities	Tax Treatment
Labuan non-trading activity Holding of investments in securities, stock, shares, loans, deposits or any other properties held by a Labuan entity on its own behalf	Not subject to tax
Labuan trading activity Includes banking, insurance, trading, management, shipping operations, licensing or any other activity which is not a Labuan non-trading activity	3% of net profits per audited accounts
Carrying out both Labuan trading and non-trading 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	Taxed under domestic or Malaysia Income Tax Act 1967 — 24%

Suitable for:

Wealth Management, Banking, Insurance, Fund Management, Shipping, Aviation, Trading Goods, Trading Financial, Intellectual Property/Licensing, Holding Companies, Islamic Finance

Vehicle Types:

Limited companies, public limited companies, branches, trusts, foundations, general partnerships, limited partnerships and protected cell companies

Capital primary business districts:

Labuan

Good Relationships:

China, Indonesia, Japan, Singapore, Hong Kong, United States. United Kingdom

Tax Burden - Business:

Very Light

Tax Burden - Individual:

Light

Tax rate:

Trading company 3% of net profits per audited accounts; non-trading 0%.

Treaty Jurisdictions:

Albania, Australia, Austria, Bahrain, Bangladesh, Belgium, Bosnia Herzegovina, Brunei, Canada, Chile, China, Croatia, Czech Republic, Denmark, Egypt, Fiji, Finland, France, Germany, Hong Kong, Hungary, India Indonesia, Iran, Ireland, Italy, Japan, Jordan, Kazakhstan, Kyrgyz Republic, Kuwait, Laos, Lebanon, Luxembourg, Malta, Mauritius, Mongolia, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Qatar, Romania, Russia, San Marino, Saudi Arabia, Seychelles, Singapore, Slovak Republic, South Africa, Senegal, South Korea, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syria, Thailand, Turkey, Turkmenistan, United Arab Emirates, United Kingdom, Uzbekistan, Venezuela, Vietnam, Zimbabwe

TIEA Jurisdictions:

Bermuda