Whether you are a resident individual, nonresident individual, small and medium company or a multinational, opting for –
- Labuan company incorporation; or
- Labuan Foreign Company registration; or
- a foreign company incorporated under the laws of another country apply to be registered as being continued in Labuan
will give you a launch pad to region’s developing economies.
This aside, you can benefit from Labuan’s wide network of trade agreements (Click here for Status of Malaysia Double Tax Agreements), ease of doing business, an attractive tax system, and sound intellectual property protection.
It is easy and quick to start a Labuan company as the process takes only two days to complete given all the proper requirements are completed and the application is duly submitted. Anyone can set up a Labuan company including foreigners. (24 hours for reservation of name and another 24 hours for incorporation)
Labuan companies may carry out either trading or non-trading activities or both through Labuan IBFC.
Labuan Non Trading – 0% TAX
Labuan non-trading company holds investments in securities, stocks, shares, loans, deposits or any other properties on its own behalf.
Labuan Trading – 3% TAX or RM20,000
Your option whether to be Taxed 3% out of Audited Net Profit / a lump sum of MYR20,000.
Every year you have the right to elect how you want to be tax for your trading activities. (refer : http://signature-trust.com/benefits.html for more information on tax applicable to Labuan company)
A Labuan trading company makes a profit by buying and selling goods and services to international customers. Examples of trading companies include:
- Shipping operations
- Any other activity which is not defined as Labuan non-trading activity
By situating your international HQs here, Labuan companies benefit from Malaysia’s network of comprehensive Double Taxation Avoidance Agreements. They also gain from Malaysia’s many trade agreements and the Investment Guarantee Agreement.
(click here for Trade Agreements)
(click here for Investment Guarantee Agreements)
Both Labuan Trading and Labuan Non-Trading
Where a Labuan company carries on both Labuan trading activity and Labuan non-trading activity, it shall be deemed to be carrying on a Labuan trading activity.
Non-Labuan Trading business activities
Domestic tax rate (currently 24%)
INCORPORATION OF LABUAN COMPANY
A Labuan company comes into existence upon incorporation under Labuan Companies Act 1990. It can have a minimum of 1 member. The members can be individuals or corporations. Members of a company are most commonly referred to as ‘shareholders’.
Labuan company is governed by the Labuan Companies Act 1990, Labuan Business Activity Tax Act 1990 (LBATA) and other applicable laws, rules and regulation. LBATA governs the tax on Labuan business activity carried in, from or through Labuan.
Certain financial activities in Labuan IBFC are required to be licensed under Labuan Financial Services and Securities Act 2010 and the Labuan Islamic Financial Services Act 2010. These activities include banking, insurance, fund management and securities dealing.
LABUAN COMPANY LIMITED BY SHARES
Many types of Labuan company are formed under the Labuan Companies Act 1990, and the most common type of company to be incorporated in Labuan is the Labuan Company Limited by Shares. Initial and ongoing fees for Labuan company registration are competitive with other low-tax and offshore jurisdictions.
The company is a separate legal entity in its own right and so shareholders are not liable for its debts. The maximum number of shareholders allowed is 50. 100% foreign ownership is allowed. Accounts are not necessary audited unless the company elects to be tax at 3% out of audited net profit in a specific year. Only audited accounts are required to be filed with Labuan FSA and Inland Revenue Board (IRB) while unaudited accounts do not need to be lodge but kept internally for record. Other annual lodgments are tax return, annual return, certificate by director and auditor (if applicable). General Meeting is required at least once a year to table the accounts to members.
START A LABUAN SUBSIDIARY COMPANY
Alternatively, a foreign company can establish a Subsidiary as a Labuan Limited Liability Company, with the parent company as its majority or only shareholder. The Subsidiary is a separate legal entity from its parent, and its liabilities do not extend to the parent. The Subsidiary can benefit from the tax incentives and exemptions as Labuan companies.
If you intend to relocate staff members to Labuan, the staff need employment pass.
START A LABUAN REPRESENTATIVE OFFICE
A Representative Office undertakes marketing and oversight activities in the region on behalf of the foreign parent company.
START A HOLDING COMPANY
Labuan Holding Company receives income from investment and is not subject to tax in Labuan. The Labuan company is able to enjoy certain tax exemptions eg. no withholding tax on dividends / interest / royalty payments from Labuan Company to Foreign Company.
Labuan companies are permitted to hold debt obligations, securities or shares, including controlling stakes, in Malaysian domestic companies. Malaysian residents with foreign assets or non-residents with assets in Malaysia are able to structure their investments via Labuan IBFC.
Where a Labuan Holding Company is used, the income received from overseas investment would be tax exempt in Labuan. Payment of dividends, interest and royalties by Labuan Holding Company to non residents would also be exempted from Malaysian withholding tax. An investment holding activity being a Labuan non-trading activity, is not subject to tax.
>Example of holding company is a China resident investor holding Labuan Company shares. Labuan Company holds shares of a company in People’s Republic of China (PRC). Dividends paid by PRC company to Labuan company shall be taxed according to China’s laws, and the tax so charged shall not exceed 10% of the gross amount of the dividends. Dividends paid by Labuan company to a resident of China being the shareholder shall be exempt from tax in Malaysia.
(Click here : Refer Article 10 on Dividends in the Agreement Between The Government of Malaysia and the Government of The People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income)
Every DTA signed differs therefore it is necessary to check you it out.
(Click here for all the DTA entered by Malaysia)
>If there is an existing foreign company, consider using a corporate structure called Satay Structure involved ownership of foreign subsidiary by a domestic Malaysian holding company (Sdn Bhd) which is in turn 100% wholly owned by a Labuan Holding Company (Parent Company). The structure allows the Labuan company to receive dividends from the foreign subsidiary through the intermediary Malaysian domestic company finally tax-free.
>If you have an existing domestic company, the domestic company can wholly own a Labuan Company. The shareholders of a domestic company are exempted from income tax on dividend received from the company which are paid out of the dividends received from a Labuan Company. (P.U.(A) 99/2000 - Income Tax (Exemption) (No:10) Order 2000)
Labuan Registration Guide
The most common type of business entity registered in Labuan IBFC is a private limited liability company. Limited liability companies have a separate legal entity, limited liability for its owners, strong public perception and an enduring structure; raising capital and transfer of ownership is easier when compared to other business structures such as sole proprietorship and partnership. Foreign business professionals often refer to this type of entity as an “offshore” company in Labuan IBFC. Governed by the Labuan Companies Act 1990, any person (foreign or local) above the age of 18 can setup a Labuan Company.
This section provides detailed information about registering a Labuan Company in Labuan IBFC including basic incorporation requirements, procedure and timeline, post-incorporation procedures etc. Irrespective of whether you are a local or foreign entrepreneur, you are strongly advised to engage the services of a Labuan Trust Company like us as we are well versed with the legal framework of Labuan IBFC governing companies and are also experienced in handling ongoing regulatory and compliance requirements.
BASIC REQUIREMENTS AND KEY FACTS FOR LABUAN COMPANY
Labuan Company may be :-
- A company limited by shares;
- A company limited by guarantee; or
- Unlimited company
The company name must be approved before you can proceed with the incorporation of a Labuan Company. You can use non romanised character or alphabet as part of the name of the Labuan Company. However, an accurate and certified rendition on the name in English language shall be employed and clearly stated in every written communication sent by or on behalf of the Labuan Company and every document issued or signed by or on behalf of the Labuan Company that evidences or creates a legal obligations of the Labuan Company.
A minimum of one director and unlimited maximum number of directors allowed. The director could be a person or a company. The director can be of any nationality and need not be resident in Labuan. Directors must be at least 18 years of age and must not be bankrupt or convicted for any malpractices. There is no requirement for the directors to also be shareholders. Nominee directors can also be appointed. Board of Directors’ Meeting can be held anywhere in the world.
Labuan private limited company can have a minimum of one and maximum of 50 shareholders. There is no residency requirement for shareholders. A director and shareholder can be the same or different person. The shareholder must be at least 18 years of age and can belong to any nationality. The shareholder can be a person or a company. 100% local or foreign shareholding is allowed. Appointment of trustee shareholders is permitted. Shareholders meetings can be held anywhere in the world.
Labuan Company can appoint one or more secretaries at least one of whom shall be a resident secretary. Resident secretary can be an individual or corporate entity which appointment is made available by Labuan Trust Company.
Shares of a Labuan Company shall have no par or nominal value. Minimum paid up capital for incorporation / registration of a Labuan company is USD1 or equivalent in any other currency other than in Malaysian Currency. The Paid-up capital (also known as share capital) can be increased anytime after the incorporation of the Labuan Company. There is no concept of Authorised Capital for Labuan Company.
Every Labuan Company shall at all time have a registered office in Labuan, which office shall be the principal office of a Labuan Trust Company.
Information (Director, Shareholder and Beneficial Owner)
There is no public register of directors and shareholders. Information about ownership is kept confidential and cannot be revealed without the order of the court.
Please refer to http://signature-trust.com/benefits.html
Labuan Company needs to comply with the laws and regulations applicable in Labuan IBFC. It is our practice to advise our clients the ongoing compliance of Labuan Company.
If you wish to register a Labuan Company, you must take into consideration the following points:
- You must engage a Labuan Trust Company to incorporate / register a Labuan Company. The law does not allow anyone else to self-register a company.
- There is no requirement to apply for employment pass if you merely want to incorporate a Labuan Company. You are free to operate your company from overseas as well as free to visit Malaysia on a visitor pass i.e. attending to company matters on a short-term basis. Professional service by Labuan Trust Company often offers the service of a resident director for those who are from Country that have CFC Regime i.e. Argentina | Australia | Brazil | Canada | China | Denmark | Egypt | Estonia | Finland | France | Germany | Hungary | Iceland | Indonesia | Israel | Italy | Japan | Korea | Lithuania | Mexico | New Zealand | Norway | Portugal | South Africa | Spain | Sweden | Turkey | United Kingdom | United States | Venezuela
- If you plan to relocate to Labuan to operate your company, you are required to obtain an Employment Pass.
Signature Group overriding statutory duty regarding the prevention of terrorism, drug trafficking and money laundering means. Signature Group are committed to undertaking a full and thorough due diligence of both Signature Group’s clients’ identities and the nature of the businesses.
Whilst Signature Group respects the confidentiality of the clients, Signature Group is obliged by law to obtain the following information relating to or connected to Labuan Company.
- FOR INDIVIDUAL
- FOR CORPORATE ENTITY
Proof of Identity
Certified true copy of Passport or Identification Card issued by the Government
Proof of Residential Address
To validate the home address of all parties related or connected to Labuan Company, please provide ONE of the following dated within the last three months, for each party certified true copy of:-
- Utility Bill (i.e. telephone bill | electricity bill | water bill etc); or
- Government or Local Authority Bill; or
- Bank Statements | Credit Card | Mortgage Statement from financial institution.
- Referral letter from a member of a professional organisation that publishes certified lists of its members and the professional body must be clearly identified or from the recognised financial institution
- Curriculum Vitae
- Certificate of Incorporation / Registration
- Certificate of Change of Name (if any)
- Memorandum and Article of Association (or equivalent)
- Register of Director (or equivalent)
- Register of Registered Address (or equivalent)
- Register of Member (or equivalent)
- Proof of Authority for corporate representative : Board Resolution | Power of Attorney
LABUAN COMPANY INCORPORATION / REGISTRATION PROCEDURE AND TIMELINE
Under normal circumstances, the company can be incorporated in 2 days.
There are two distinct steps involved in the Labuan company setup procedure:
- Company Name Approval and;
- Company Incorporation / Registration.
Both steps can be accomplished on the same day assuming there are no delays.
To improve your chances of quick name approval, make sure the name:
- Is not identical or too similar to any existing company name.
- Does not infringe with any trademarks
- Is not obscene or vulgar
- Is not already reserved
An approved name will be reserved for 3 months from the date of application. You can extend for another 3 months by a lodgment by the Trust Company before the expiry date.
Once the name has been approved, the filing of the incorporation request as well as the approval from Labuan FSA can be completed the fastest is within half day assuming incorporation documents are ready and have been signed by the directors, shareholders and secretary of the new company.
There are cases when the incorporation procedure can get delayed if the directors / shareholders are of certain nationalities etc, although this happen in rare case only or their name show up in the worldcheck for adverse report. In such cases, the authorities might ask for additional information or documents to prove that the identity of the person is different from the person in the worldcheck database.
A registration fee is payable to the Labuan FSA at the time of incorporating a Labuan company
HOW TO REGISTER
- Please Contact Us and our dedicated consultant will assist you and furnish you with the requisite form (“the Form”) for signing up with us.
- You fill up the Form (even as a draft) and emailed it back to us and we will look into it and guide you accordingly.
- We will send you the pro-forma invoice and if it is acceptable to you, then you will arrange payment thereof and email / fax the remittance slip to us for our further action.
- Upon receiving your payment, we will proceed to reserve the name and prepare the statutory documents for incorporation of the Labuan Company (“Statutory Documents”) and we will email the Statutory Documents to you for your further action.
- You email to us the duly signed Statutory Documents and will proceed to lodge the incorporation of the Labuan Company with Labuan FSA.
- Your Labuan Company is registered.