Guide to Starting a Labuan Factoring Business

Looking to venture into the factoring business in Malaysia? A Labuan company might be the ideal setup for you! Establishing a Labuan Factoring Business offers numerous advantages, and Labuan stands out as a fully compliant business center, recognized by the OECD as one of the “white-list” jurisdictions.

A Labuan factoring business involves acquiring debts from individuals or institutions at a discount. In a factoring transaction, a business sells its accounts receivables, such as invoices, to a third-party commercial finance company, known as a “factoring company.” In exchange for a discounted amount (typically 80% of face value), the business receives immediate cash, and the debt responsibility shifts to the factoring company. The factoring company then pursues the client to collect the full amount, retaining the remaining balance. Factoring, a longstanding form of business financing, serves as a crucial cash management tool for many businesses.

Opting to establish a new factoring business for the Asian markets is a strategic decision, offering the opportunity to leverage offshore advantages. Additionally, if you’re already engaged in factoring, initiating a new Labuan company could bring about significant benefits.

See Also

Comparison of Labuan with Other Jurisdictions FAQs on Labuan Factoring License

Why Choose Labuan

Strategic location to tap into the Asia Pacific market

Shared time zone with major Asian cities for seamless interaction

Excellent infrastructure and regulations within the Labuan IBFC

OECD whitelist jurisdiction status

Recognised by prominent exchanges for entity listing (such as Hong Kong, Singapore, Malaysia, Australia, and Dubai Exchanges)

100% foreign ownership with a minimum requirement of 1 shareholder and 2 directors

Low corporate tax rate of 3%

Absence of withholding tax, stamp duty, GST, import duty, sales or service tax, capital gains tax, inheritance tax

Void of tax on dividends to shareholders

Void of tax on director fees for foreign directors

Eligibility Criteria for Labuan Factoring License

1

A Labuan company incorporated under the Labuan Companies Act 1990.

2

A factoring company registered under the Banking and Financial Institutions Act 1989.

3

A Special Purpose Vehicle (SPV) set-up to facilitate inter-company factoring transactions.

Licensing & Operational Requirements of a Labuan Factoring License

Operational Requirements
  • Maintain sufficient capital to manage the company’s daily operations.
  • Establish an operational office in Labuan with a minimum number of 2 full-time employees and a minimum annual operating expenditure of MYR 100,000.
  • Permitted to transact in any currency, with all transactions conducted to, through and from Labuan.
  • Engaging in transactions with Malaysian residents is prohibited unless approved by the Central Bank of Malaysia.
  • Appoint an approved auditor in Labuan and maintain adequate and proper records and books of accounts.
  • Submit audited annual financial statements and other necessary information, including prudential information, general business conduct, and the volume and direction of business activities in Labuan, to the Labuan Financial Services Authority (Labuan FSA).
  • Notify Labuan FSA of any amendments to constituent documents, shareholdings, management, or business plan.
  • Conduct business with due diligence and sound principles and comply with local laws and regulations at all times.
FA Advisory offers one-stop application solutions for your Labuan Factoring License, encompassing:
  • Consultation on eligibility and procedural guidance tailored to your profile.
  • Profiling, due diligence and guidance on documentation preparation.
  • Preparation of Business Plan, Financial Forecast and Operation Manuals.
  • Submission and supervision of the application process until approval.
  • Acting as your liaison and contact point with LFSA, arranging for interviews (if any).
  • Tracking the license approval and handling all queries from LFSA.
  • Advisory services on the appropriate company structure post-approval.
  • Assistance in setting up onshore and offshore bank accounts.
  • Assistance in establishing operational and marketing or co-located offices.
  • Staff provision and office space rental.
  • Internal audit and compliance advisory.

About FA Advisory

Comprising a team of seasoned professionals well-versed in Labuan’s business landscape, FA Advisory Limited extends a comprehensive suite of services covering corporate services, private wealth management, and licensing compliance administration, all tailored to meet the unique needs of our clients.

At FA Advisory Limited, our expertise lies in delivering Labuan insights that facilitate business expansion, simplifying intricate processes, and offering valuable information to guide you through various facets of your journey.

Choose FA Advisory as your trusted partner in navigating the dynamic business landscape of Asia. With our commitment, we are your gateway to success in Labuan and beyond.

Email: advisory@finarkasia.com | Phone number: +6010-931 6678