Venturing into Labuan's business landscape demands regulatory compliance and strategic planning, especially for foreign companies. To establish a presence in Labuan, foreign entities must register as a “Foreign Labuan Company” - also known as a "Labuan Branch"- under the Labuan Companies Act 1990 (LCA). Unlike registration processes applicable to foreign companies under the Malaysian Companies Act 2016, Labuan Branch registration requires the engagement of Labuan IBFC registered trust companies as registered agents, ensuring adherence to regulatory standards and fostering operational success.
What is a Foreign Labuan Company?
A foreign company shall not have a place of business in Labuan or carry on business in Labuan unless it is registered as a foreign Labuan company under the Labuan Companies Act 1990 ("LCA").
Branches established in Labuan are regarded as extensions of foreign companies seeking to broaden their operations into Labuan and Malaysia. Operating as wholly dependent entities, Labuan branches typically defer to decisions of their parent companies, ensuring alignment with overarching corporate strategies before implementing any local initiatives.
Which Authorities Approve your Labuan Branch?
Approval for Labuan branches, like most business structures in Malaysia, is typically granted by key regulatory bodies such as the Inland Revenue Authority, Labuan Financial Services Authority, Central Bank of Malaysia, and Malaysia Immigration Department. However, certain sectors, particularly financial services, may entail additional licensing and oversight.
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
Steps to Establishing a Labuan Branch
When establishing a branch in Labuan as a foreign entity, consider the following key steps:
- Apply for a work permit visa as a foreign entrepreneur in Malaysia.
- Prepare the Articles of Association containing detailed information about the Labuan branch, the activities which will be placed in Labuan, the name of the owners, the board of managers and the capital contribution.
- Provide comprehensive information about the parent company intending to establish the Labuan branch.
- Prepare and submit business plan, three-year financial projections, audited accounts, a letter of consent from the country of origin’s regulatory authority as well as details about the composition of the Board of Directors. These requirements for submission may differ from one case to another.
- Open a bank account to accommodate the minimum share capital and facilitate future financial transactions.
- Appoint a representative agent and a board of managers to oversee the operations of the Labuan branch.
- Register for tax purposes and fulfill social contributions obligations in Malaysia.
While these steps offer a general overview, it is important to note that each process may vary based on specific circumstances. For instance, when establishing an investment bank branch in Labuan, a letter of undertaking from the parent company abroad is required, confirming acknowledgment of liability for the branch's operations. Additionally, certain businesses may be subject to additional licensing or reporting requirements. For tailored guidance and detailed insights tailored to your unique situation, we encourage you to connect with our experienced consultants.
Regulatory & Operational Requirements of a Labuan Branch
When considering the establishment of a Labuan Branch, there are several crucial steps and regulatory requirements to adhere to. Here's what you need to know:
The name of your Labuan Branch should be carefully chosen, ensuring it complies with Labuan FSA regulations. Generally, it's recommended for the Labuan Branch to adopt the name of its foreign parent company with the addition of "Labuan Branch."
A registered office in Labuan is mandatory for the Labuan Branch, serving as its principal office. FA Advisory Limited can provide the registered office for your Labuan Branch.
Unlike standalone companies, Labuan Branches do not have their own share capital.
Your Labuan Branch must fulfill several annual obligations, including the lodgment of an annual return, payment of an annual government fee, and filing of annual tax returns by March 31st of each year.
To comply with LBATA, Labuan entities must meet substance requirements, including maintaining an adequate number of full-time employees and annual operating expenditure in Labuan.
Labuan entities may transact with Malaysian residents in Ringgit Malaysia, subject to certain restrictions and deductions allowed for payments made by residents to Labuan entities.
- 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