Where is Labuan?

The Federal Territory of Labuan is a part of Malaysia and comprises seven small islands, of which Pulau Labuan is the largest. Labuan International Business and Financial Centre (Labuan IBFC) presents a comprehensive midshore solution striking the ideal balance between client confidentiality and compliance with international best standards and practices.

Its business-friendly environment, anchored by a simple and attractive tax system, is well-supported by a robust, modern and internationally-recognised legal framework enforced by its regulator, Labuan Financial Services Authority (Labuan FSA).

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What is a Labuan Company?

A Labuan Company is a company incorporated under the Labuan Companies Act 1990 (LCA). Malaysian and non-Malaysian citizens are welcome to set up Labuan companies.

It is mainly useful for cross-border businesses such as investment, consultancy, and financial market trading at a competitive tax rate of 3% (subject to compliance with substance requirements).

A Labuan Company is a company incorporated under the Labuan Companies Act 1990 (LCA). Malaysian and non-Malaysian citizens are welcome to set up Labuan companies.

It is mainly useful for cross-border businesses such as investment, consultancy, and financial market trading at a competitive tax rate of 3% (subject to compliance with substance requirements).

See Also

Incorporation of a Labuan Investment Holding Company
Comparison of Labuan with Other Jurisdictions
FAQs on Labuan Companies & Compliances

Types of Labuan Company

Labuan Company

Labuan Foreign Company

Labuan Protected Cell Company

A Labuan Company:

1

May be a company limited by shares or by guarantee or an unlimited company.

2

May participate in Labuan business activities and enjoy attractive tax benefits provided under the Labuan Business Activity Tax Act 1990 (LBATA). 

3

May carry out any business that is permitted in Malaysia in, from or through Labuan.

4

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

Labuan Company and Tax Framework

Labuan Companies may carry out business activities that are defined as a Labuan trading activity or non-trading activity, carried out in, from, or through Labuan, excluding any activity which is an offence under any written law.

There are two types of Labuan business activities.

1. Labuan trading activity that includes banking, insurance, management, licensing, shipping operations, or any other activities specified under the First Schedule of the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 [P.U.(A) 423/2021] (“Regulations 2021”).

2. Labuan non-trading activity which means an activity relating to the holding of investments in equity, securities, stocks, shares, loans, deposits, or any other properties situated in Labuan by a Labuan entity on its own behalf, under the Second Schedule of the Regulations 2021.

The Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 has been gazetted on 22 November 2021 to further revise the substance requirements for Labuan entities listed in the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 [P.U.(A) 392/2018], which have come into operation on 1 January 2019.

In general, a Labuan company needs to demonstrate that it has substance via its functional structure such as a physical office, staff administering the daily operations of the company, business spending, and the necessary operating tools or equipment in order to evidence substance.

The following is the summary after the changes in substance requirements and tax framework:

301a.Labuan Company - Substance Requirements & Tax Framework.pptx

Over the years, the promoted activities in Labuan have evolved, and at present, Labuan focuses on these core areas:

 

Investment holding companies for multinational structures
Labuan Companies are accepted and recognised under the Hong Kong Exchange, Singapore Exchange, and Australia Exchange listing rules. Labuan IBFC jurisdiction is not subject to Malaysia exchange controls and foreign ownership limitations. In addition, a transparent and flexible tax system provides ease for assets and investment holding companies from other countries to enjoy doing business in Labuan.

 

Financial licenses for new entries and existing market players
Labuan IBFC offers various financial licenses, including banking license, money broking license, and captive insurance license to facilitate the evolving needs of current businesses.

 

Fund or capital structures for business expansion and investment
Labuan IBFC allows professionals worldwide to apply for a fund manager license for different types of fund structures. For a private company looking to do fundraising with single projects, it is also welcomed to set up a Labuan private fund for fundraising purposes.

 

Extensive fintech licenses and solutions
The only midshore jurisdiction in Asia that supports comprehensive fintech ecosystem. It is well-regulated where the industry players can seek solution and business expansion. Labuan IBFC offers digital banking license, cryptocurrency money broking license, credit token license, and payment system to facilitate the establishment of the digital ecosystem.

 

Complete wealth management structures for business succession and wealth preservation
The introduction of the Labuan Foundations Act 2010 is one of the additions or changes to the wealth management solution provided by Labuan. Labuan Private Foundation enables high net worth families to plan for their family succession. Labuan Trust Act 1996 also provides for the creation and recognition of offshore trusts.

FA Advisory offers one-stop application solutions for your Labuan Business, 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 FAA Advisory Limited

Comprising a team of seasoned professionals well-versed in Labuan's business landscape, FAA 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 FAA 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 FAA 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