Labuan is comprised of a few small islands located off the coast of Sabah, Malaysia. Labuan is part of Malaysia and being formally under British rules is a common law jurisdiction, with an independent English based-legal system.

Incorporation in labuan

Item(s)	Description
Location	Labuan comprises a few small islands located off the coast of Sabah, Malaysia. Labuan is part of Malaysia and being formally under British rules is a common law jurisdiction, with an independent English based-legal system.
Type of company	Called Labuan Company which in most cases must be companies limited by shares.
Time to incorporate	In most cases including reservation of name, a Labuan Company can be incorporated within 1-2 days. A name once reserved is valid for three months. Please allow 1-2 weeks for corporate kits to be sent.
Government’s Registration fee	From the minimum of US$400.00 to the maximum of US$1500.00 depending on the size of authorised capital chosen. Most companies pay the minimum authorized capital fee.
Shelf company availability	Yes generally available.
Taxation	3% (Trading) and not taxable (Non-Trading) provided substance requirement is met.
Minimum annual government fee	RM2600.00 (approx. US$730.00) regardless of capital structure, payable every year the latest one month before the anniversary of the company.
Disclosure of beneficial owner	Labuan adopts anti-money laundering/counter terrorism financing legislation under which all licensed service providers are required to know the identity of their customers before accepting a transaction. Not to do so would be an offence under the legislation. Therefore disclosure of beneficial ownership will be made to trust companies, banks, insurers, etc. but not to the Authority.
Bearer shares	Not permitted. All shares must be in registered form.
Standard minimum paid up	None but our standard company comes with a standard paid up of U$1.00.
Standard authorised capital	None. Labuan now adopts no par value regime.
Permitted currency of Capital	Any currency except Malaysian Ringgit although in most cases the US$ is prevalent.
Minimum number of Shareholders	One and there is no residency or nationality requirement.
Minimum number of Directors	One and there is no residency or nationality requirement.
Corporate directors	Yes.
Local directors	Optional.
Company secretary	Yes and if more than one is appointed at least one must be a resident secretary. Only an approved officer of a Labuan trust co or its wholly owned subsidiary may be appointed as a resident secretary.
Public record of directors & Shareholders	No.
Location of directors and shareholders meeting	Anywhere.
Telephone board meeting	Yes.
Access to Double Tax Treaty	With careful planning, Labuan offshore companies may enjoy the benefits of Malaysia’s extensive Double Tax Treaties.
Requirement to file account	There is a requirement to keep accounts that will sufficiently show the financial position of the company. With increased compliance, it is commonly expected that most companies will be required to prepare at least management accounts.
Requirement to file annual return	Yes and it is simple.
Local registered office address	A Labuan offshore company must have at all time a registered office in Labuan. Such an office being the principal office of a trust company.

Labuan Corporate Data Sheet - Summary

Items(s)	Description
Type of company	Trading / Non-Trading [1]
Common or civil law jurisdictions	Common
Shelf company availability	Yes
L&C’s time to incorporate	2-3 days
Min. annual fee	MYR2600 or App. USD700.00 [2]
Annual return filling fee	NIL
Taxation	3% (Trading) and not taxable (Non-Trading) provided substance requirement is met.
Public records of director/shareholder	NO
Bearer shares	NO
Standard minimum paid up capital	USD1.00
Standard authorised share capital	NO
Permitted currency of capital	Any currency save the Malaysian Ringgit
Minimum number of shareholders	ONE
Minimum numbers of directors	ONE
Corporate directors	YES
Local directors	NO
Company secretary	YES
Company seal	YES
Public record of directors	NO
Public record of shareholders	NO
Location of directors meeting	Anywhere
Location of shareholders meeting	Anywhere
Telephone board meeting	YES
Double taxation treaty access	YES
Requirement to file account	YES
Requirement to prepare account	YES
Requirement to file annual return	YES
Change in domicile	YES
Local registered address	YES

Labuan IBFC - Cost and Benefit Analysis

Item(s)	Star Rating	Description
Corporate Registration Efficiency	★★★★★	Name search takes 1-2 hours only and name reservation within one day. Company can be incorporated in 1-2 day.
Availability of Name	★★★★★	Names are easily available.
Confidentiality	★★★★★	Unauthorised disclosure of client’s information is subject to penalty.
Maintenance Cost	★★★★	Higher in comparison to IBC jurisdictions like BVI, Brunei, Niue or Bahamas
Regulator	★★★★★	LFSA is the arm of the Central Bank and is an excellent regulator. LFSA is also a member of various international regulatory bodies.
Location	★★★★	Remote from mainland Malaysia although connected by flight on twice-daily basis to and from Kuala Lumpur.
Exchange Control	★★★★★	Very liberal
Rate of Tax	★★★★★	Very favourable, being 3% of net audited profit for Trading or 0% for Non-Trading.
Double Tax Treaty Access	★★★★	Malaysia has signed 50++ DTT with its business partners and Labuan being part of Malaysia enjoys DTT protection. However, a few countries notably Japan, the UK and Switzerland have denied Labuan companies of Malaysia’s DTT protection.”
Local Banking Services	★★★	Although there are more than 50 offshore banks in Labuan. Not all of them take deposits. Initial deposit is ranging from US$5k to US$500k. Availability of internet banking is limited.
Time Zone	★★★★★	Same time zone with major Asian capitals (GMT+8)
Reputation	★★★★★	Labuan is part of Malaysia which is a major trading nation.

Click the link below to see the banking option we have for Labuan Company.

Labuan Company Banking Option Download

Please do not hesitate to contact us for more information on the banking option.

Click the link below to see the fee rates we have for Labuan Company.

Fee schedules for formation of Labuan companies and other fees associated with it. Download
Retail Charges for Miscellaneous Services – Labuan IBFC Download

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Whilst there is no law requiring a Labuan company to open its account in Labuan or the rest of Malaysia, these two places are the most natural places. However, we have successfully opened bank accounts for Labuan companies in other offshore and onshore centres.

Further, there is no law requiring Labuan company to open its bank account in an offshore centre. As a matter of fact and practice, we prefer to recommend opening in an offshore centre like Kuala Lumpur. This will enable the Labuan company to have access to “high street” banking services, with superior internet banking and lower bank charges.

10-15 years ago it was relatively easy to open bank account for a Labuan co. But with significant increase in compliance and transparency, this is no longer possible. Our roles is to identify for you which banks will be the most suitable, given your nature of business and circumstances. With more than 18 years of experience in this we can recommend you the most suitable banks if we understand your nature of business and circumstances in detail.

Some important issues to consider.

This refers to geographical location and the most natural location for Labuan is Labuan itself and Kuala Lumpur. But admittedly some banks in Kuala Lumpur have placed restrictions on Labuan company opening bank accounts with them. Major financial centres like Singapore and Hong Kong may be chosen to, but if choosing a major financial centre, client is expected to demonstrate “solid proof of existing business”.

Typically this can mean either a local bank or an international bank, Islamic banks or conventional banks, commercial or private banks. With our vast experience, we can reasonably recommend you which type of banks to be chosen. As a general rule required by a local bank is less onerous. Further international banks require higher initial deposit and expect large turn over.

At least two major advantages of commercial banks are lower banking charges and high street presence. But it seriously lack personalise services customarily found in a private bank. A client choosing a private bank must be aware of higher initial deposit and banking charges.

Local banks tend to be smaller and impose lower bank charges and initial deposit. However, local banks tend to have basic internet banking only as opposed to very efficient one from international banks. Client however should be aware that international banks not only impose high banking charges and high initial deposit, but expect your turn over to be large too. If your transactions and annual turnover is likely to be small, it is not advisable to pursue international banks.

From our experience, the answer is YES. Just because a bank is small and operating in a lesser known centre, it does not mean it is not well regulated or not properly run. We have experience in opening bank accounts for Labuan companies in situation like this. Of course as a rule of thumb, our clients prefer bigger banks in bigger centres.

It should be remembered that whichever bank you choose, full disclosure of beneficial ownership is mandatory. The use of anonymous account is the thing of the past. Whilst in general customer’s confidentiality will always be protected, such protection is only afforded to customers with genuine business. In most cases, where there is a court order requiring disclosure or where there is suspicion that a transaction involves proceed of criminal activity, a bank may be compelled to make disclosure. Recent OECD’s initiative on compelling exchange of information between member states and between offshore centres and member states will make “confidentiality” advantage questionable. In the near future, many offshore centres will demand for financial information to be made available by offshore service providers. It is however not clear how and to what extent the available financial information will be made use by regulators in each centre.

All financial centres have now legislated laws on anti-money laundering and anti-terrorists financing measure with the effect that banks operating in those centres are required to apply more stringent customer due diligent procedures. In most cases documents required are more numerous and time taken to approve an application is longer than before.

No two banks have identical requirement to meet their due diligent prior to opening accounts. Nevertheless common theme appears. It must be remembered that bank reference, detailed explanation of business and source of fund are commonly required.

Duly completed and signed Bank account opening form.
Duly signed and verified bank Specimen cards.
Passport copies of director, signatory and beneficial owner verified by banker
Proof of residential address; normally in the form of bank or credit card statement and utility bills.
Bank reference; usually reference from an international bank is preferred although not a must for some banks. The bank reference should state at least number of years of banking relation, type of account and whether the conduct of account is satisfactory.
CV or resume; what the bank wants to see here is what the customer has been and is doing now.
Detailed nature of business, i.e. The bank needs to understand the client’s business. Most banks will require business cash flow projection.
Company / business profile; Most of these companies are new so there is no profile. Profile of a related company or company which is owned by the beneficial owner will do.
Source of fund; i.e. What is the economic origin of the money that will pass through the account. For example consultancy fees, trading commission, etc.
List of counter parties; i.e. If your client claimed to be in pharmaceutical business he should be able to list out a few of his suppliers and customers. It is not likely that people in who claim to be in this business do not know his counter parties.
Reason/s why account is needed; whatever is the reason so long as legitimate.
Face to face meeting; Not strictly necessary but from our opinion this is very important. This is just a one-time trip that is worth taking. Meet the bank and its officers and this would help so much in future dealing with the bank.

Opening and maintaining offshore bank account may be a costly affair. Our clients are advised that at least one-time introduction fee must be paid and bank charges for transactions carried out may be more expensive with some offshore banks.

We have assisted hundreds of clients in opening offshore bank accounts in various centres and are ably equipped to advise on the confidentiality, due diligent, documentation requirement and cost aspects of opening and maintaining offshore bank accounts. The fact that we are qualified intermediaries with a few banks also ensure that our clients’ application enjoy high rate of success.

Click the link below to see the banking option for Labuan Company.

Labuan Company Banking Option Download

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The benefits of conducting or doing business from Labuan IBFC are numerous. The prime of which is the fact that in Labuan IBFC no or minimum tax is levied on profit derived from offshore business. Nevertheless it should be remembered that some offshore businesses must be conducted with valid licence. We have experience in assisting our clients in applying for various licences in Labuan IBFC. Labuan IBFC is well regulated. Applicants for business licences must consider sound financial strength, solid and proven industry records, competency, fit & proper of key persons and sound AML/CFT practice as very important criteria when applying for

Labuan is a well-regulated financial centres and over the years Labuan FSA has issued financial business licences to local and foreign owned international players. Cost of operation, including licence fee, is lower than centres like Hong Kong or Singapore or even onshore Malaysia. Further to this advantage is the fact that all licensed entities are allowed to run a marketing office in either Kuala Lumpur or Johor Baharu or both.

The following are some of the business or financial licences that can be applied in Labuan IBFC;

Under Banking industry

Labuan banking business.
Labuan investment banking.
Islamic banking business.
Building credit business.
Credit token business.
Development finance business.
Leasing business.
Factoring business.
Money broking.

Under Insurance industry

Captive insurance.
Life, general and composite insurance.
Re-insurance.
Insurance manager.
Underwriting manager.
Insurance broker.

Under Securities industry

Fund management.
Mutual fund.
Trustee for mutual fund.
Administrator of mutual fund.
Custodian of mutual fund.

Under trust industry

Trust company.
Managed trust company

The annual fee and annual licence fee to be paid to LFSA also differ, as illustrated in the tables below:

Annual Fee

Type Of Company	Annual (MYR*)
Offshore Company	1,500
Foreign Offshore Company	5,300
Money Broking	5,000
Offshore Factoring within Labuan	40,000
Offshore Factoring outside Labuan	60,000
Trust/Managed Trust Companies	8,000

Annual License Fee

Type Of Company	Annual License (MYR*)
Offshore/ Investment Banking	80,000
Offshore Leasing Business	40,000*
Captive Insurance	10,000
Master Rent-A-Captive	13,000
Subsidiary Rent-A-Captive	3,000
Life/ General Insurer/ Re-Insurer	50,000
Underwriting/ Insurance/ Broker	20,000
Fund Management outside Labuan	7,500
Fund Management within Labuan	5,000
Company Management	5,000

To check prevailing rate in US$ please click www.xe.com

Whilst you can make an application on your own, you may also appoint us during the application stage. If we are appointed, during the application process we are your “conduit”, receiving correspondence from you and the authorities. We will send your application forms, advise you on completion of the forms, relay your inquiries to the authorities or vice versa, advise on the documents required and its sufficiency, etc. We will submit complete documents on your behalf and attend to all inquiries, and where necessary attend meetings and apply for extension of time to file certain documents.

Establishment of your licensed company in Labuan IBFC
This may be done prior to submitting your application. This may also be done once approval for a licence is granted, but before a licence is extracted. At this stage we will incorporate your company in accordance with the structure that you require, including drafting suitable M&A for your company. Once incorporated we will provide the following;

Registered address.
Licensed Company Secretary.
All company documents and kits.
Open bank account/s.
Appoint auditors.
Prepare resolutions, if required from time to time.
Mailing, ( if required ).
Provision of resident director ( if required ).
Annual statutory and tax filling.

If you require an office in Labuan IBFC we could help you with:

Recommending suitable location.
Establishing phone, fax, internet lines.
Establishing courier accounts.
Applying for work permit, etc.

Please take note a licensed entity may apply for marketing office to be set up in either Kuala Lumpur or Johor Bahru and we can assist you to apply for an approval. Fee payable to Labuan FSA after approval is MYR7500.00 annually.

On consultancy basis we can undertake to review your policies and procedures, including AML/CFT policies and procedures. As most licensed companies are required to conduct internal audit, we can perform this task on consultancy basis.

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Type of Foundation: Labuan Foundation may be Conventional or Islamic. A Foundation is a corporate body with a separate legal entity, established to hold assets in its own name for the purposes set out in its charter or constitutive documents, with the objective of managing its assets for the benefit of a class of persons on a contractual basis. It is typically used for private wealth management, charitable purposes, family patrimony and collective purposes. In the case of an Islamic Foundation, the foundation’s aims and operations shall be in compliance with Shariah principles.

Item(s)	Description
Regulator or Registrar:	Labuan Financial Services Authority, a division of the Ministry of Finance, Malaysia.
Time to Register:	In most cases, a Foundation can be registered within 2-3 days.
Government’s Registration Fee:	Registration charges – MYR 750 (US$253, appx)
Shelf Foundation Availability:	Currently not available.
Registered Office:	A Foundation must maintain a registered office in Labuan which shall be the address of the secretary to that Labuan Foundation. The administration and operations of a foundation are carried out in accordance with contractual rather than fiduciary principles.
Charter:	The charter sets out the parameters within which the Labuan Foundation is to be managed and governed.
Taxation:	Where assets of Labuan foundation include Malaysian property, the Income Tax Act 1967 [Act 53] shall be applicable to any income received from the Assets. Where the income derived from any non Malaysian assets, it is subject to the Labuan Business Activity Tax Act 1990 [Act 445]. The Labuan Business Activity Tax Act, taxes trading activities carried at the rate of 3% on its audited trading profits or, upon election, at a fixed rate of MYR20,000. No tax on non-trading activities.
Minimum Annual Government Fee:	MYR 750 (US$253, approx) regardless of capital structure, payable every year the latest one month before the anniversary of the Foundation.
Disclosure of Beneficial Owner:	Labuan adopts money laundering legislation under which all licensed service providers are required to know the identity of their customers (Know Your Customers) before accepting a transaction. Not to do so would be an offence under the legislation. Therefore disclosure of beneficial ownership will be made to the Trust Company, Bank, Insurers, etc. but not to the Authority.
Minimum Number of Founders:	One and maybe a natural person or body corporation, and there is no residency or nationality requirement.
Minimum Number of Council Members:	One and maybe a natural person or body corporation, and there is no residency or nationality requirement.
Officers:	Minimum one and maybe a natural person or body corporation, and there is no residency or nationality requirement.
Beneficiaries:	May include individuals, body corporate or charities and are those who have vested interest in the assets of the foundation. Unless specifically provided in the charter or articles, beneficiaries have no rights to the foundations assets and are not owed any fiduciary duties.
Corporate Founder:	Yes/Optional.
Local Council Member:	Yes/Optional.
Foundation Secretary:	Yes and if more than one is appointed, at least one must be a company registered as a Labuan Trust Company under Part V of the Labuan Financial Services and Securities Act 2010
Public Record of Directors & Shareholders:	No.
Location of Directors and Shareholders Meeting:	Anywhere.
Access to Double Tax Treaty:	With careful planning, Labuan foundations may enjoy the benefits of Malaysia’s extensive Double Tax Treaties.
Requirement to File Account:	Only foundations electing to pay 3% tax. Nevertheless there is still requirement to keep accounts that will sufficiently show the financial position of the Foundation.
Requirement to File Annual Return:	Yes and it is simple.

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Labuan trust company – A trust company is a separate corporate entity owned by a bank, law firm, or independent partnership. We are one of the Labuan trust company to manage trusts, trust funds, and estates for individuals, businesses, and other entities. A trust is an arrangement that allows a third party or trustee hold assets or property for a beneficiary or beneficiaries.

A trust is a relationship between a person called the trustee and another called the beneficiary. This relationship exists when a person called settler entrusts the trustee with assets whereby the assets are to be kept for the benefit of the beneficiary. The trustee becomes the legal owner and is responsible for managing the assets and distributing them to the beneficiaries of the trust (which could include the person or corporation which transferred the assets to the trustees) in accordance with the terms of the trust deed. The terms on which the Trustees administer the trust assets are detailed in a trust deed and trust legislation to govern trusts has been enacted in many common law jurisdictions.

Whilst a company is a legal entity capable of existing on its own, a trust as a relation exists for as long as the object, the intention and the subject matters of the trust are certain.

By far the most unique feature of a trust is the ability of an owner of asset to fully divest his legal ownership in the asset to a trustee but at the same time retaining the beneficial ownership in the assets either for the benefit of others or for his benefit or the combination of both as beneficiaries. It is this unique separation of ownership offered by a trust that has made trust being used extensively in tax planning and assets protection scheme. In most cases, and provided the divesting is complete and the settler is still solvent after divesting his assets and the divesting is not to defraud his creditors, he may be able to safe guard his assets from creditors

In other instance where a settler wishes to set aside assets to his love ones but does not wish to distribute the assets immediately for tax reason, the divesting of such assets to a trustee will ensure that distribution is made to his love ones when it is fiscally wise to do so. In addition, the fact that the trust assets are kept or in the hand of trustee in tax efficient jurisdictions can offer significant opportunity for growth. In most cases and in conjunction with your own adviser, we can help you to establish trust for tax planning or asset protection purpose in a few centres.

What assets can be held by a Labuan trust?

Shares in both listed and unlisted companies.
Real estate.
Work of art.
Investment portfolios.
Real and intellectual property.
Bank deposits.
Life assurance policies issued on the life of the Settlor.
Most other types of asset.

Why establish a Labuan trust?
There are many reasons why a settlor may wish to create a Labuan trust but some of the principal ones include those listed below.

Tax Mitigation:
Labuan trusts have traditionally been a very important tax planning device and even today a very high proportion of tax saving schemes involve trusts. When a Labuan trust is established , then there will be no taxes applicable to the assets and income of the trust.

Preservation of Family Wealth:
Labuan trust may be used to own specific assets, for example land or interest in family company which it would be appropriate or practical for a settlor to divide between individuals. The use of the trust will allow relevant individuals to benefit from the assets without being directly interested in the assets or having personal ownership and so preserve the assets intact for future generations.

Avoidance of Probate:
Avoidance of probate can be of significant benefit to settlor, both in terms of tax saving and in preservation of confidentiality. As the legal title to the assets concerned passes from the settlor to the trustee of the Labuan trust at the time the settlement is made, there is no change of ownership when the settlor dies, and this neither will nor probate is required at the time of his death.

Emigration:
When a person and or his family moves from one country to another this is often an ideal time and perhaps the only time to set up a trust to take advantage of the tax, exchange control and other laws of the countries concerned in order to preserve family wealth and flexibility to manage it, and allow the members of the family to enjoy the capital and income in the most advantageous ways.

Protection of Assets:
Since the legal ownership of assets within a trust is vested in the trustee of the Labuan trust and not the in the beneficiaries, the settlor and the beneficiaries have no legal control over the assets. As a result, benefits can accrue where the declaration of wealth are required to be provided by individuals in their own countries. In addition the Labuan trust will also protect at least a portion of a person’s wealth from legal attacks by third persons, as for example in the case of suits based on professional negligence or malpractice.

Types of Labuan trusts:

Most Labuan trusts fall into four broad categories:

Private:	Including discretionary, accumulation and maintenance, life interest and fixed interest trusts.
Corporate:	Including pension and employee benefit trusts.
Charitable:	Solely for the benefit of charitable organizations.
Purpose:	Trusts with no beneficiaries that are established for purposes that are certain, reasonable and possible.

Modern trust deeds can be tailored to meet your specific requirements. Generally they are worded in the widest possible terms to allow a trustee scope to respond to changing circumstances and requirements.

Discretionary Trusts
The most flexible form of Labuan trust and used in wealth protection and tax planning. A discretionary Labuan trust will normally allow the Trustees to appoint additional beneficiaries or to remove existing beneficiaries, and will usually also allow the Trustees to distribute the income and capital of the trust to the beneficiaries in varying amounts and at various times. When a Settlor establishes a discretionary trust he will generally provide the Trustees with a Letter of Wishes, which provides guidance to the Trustees on how he would like them to administer the trust and manage the assets.

Interest in Possession Trusts
These differ from discretionary trusts in that the beneficiaries will be entitled to receive income and capital from the trust as detailed in the trust deed.

Accumulation and Maintenance Trusts
Almost always established for the benefit of children. The trust deed will specify that the trust fund be used for the education and maintenance of the children up to a certain age with surplus income being accumulated by the trust. Once a predetermined age has been reached the beneficiaries will be entitled to receive income and capital from the trust as detailed in the trust deed.

The Advantages of Labuan Trusts
Private relationship, for example, in most jurisdictions trust deeds are not publicly registered.

Wealth protection.
Tailored to specific family requirements.
Recognized in all common law jurisdictions.
Increasing recognition in important civil law jurisdictions.
An important tool in international income, capital gains and estate tax planning.
Used by corporations for employee benefit plans, retirement and stock option schemes, insurance plans and special financing arrangements.

Labuan Trust Solutions for Individuals
A trust provides many useful solutions to individuals, some of which are:

Preserving their wealth against uncertainty, political, economic or family.
Transferring wealth to their heirs in a tax-efficient manner. They want to plan their estate to maximize the benefits of their wealth for family members and others.
Transferring wealth to their heirs in accordance with their wishes and not in accordance with the laws of the country where they live.
Consolidate the ownership of assets owned throughout the world in one location.
Centralizing reporting of business and assets.
Minimizing or eliminating estate taxes arising on the death of the Settlor.

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International debit cards are commonly used to allow easy access to and use of funds. However it must be noted that its use is mostly for meeting personal expenses such as travels, entertainment and leisure. Working with a number of providers, we can assist you to apply not only single card for personal or family use, but also legal card programmes that will allow your company to issue unlimited number of cards to pre-approved or defined categories of employees or persons.

Here are just some of the most common ways to use the cards.

A cash card works like an ATM card. You can effortlessly and safely withdraw cash in millions of ATM machines around the world. Whether you are an active entrepreneur, participant in a different affiliate programs, or a consultant, your cash card simply allows you withdraw cash from your account wherever you may be.

Pay bills on the go, purchase flight ticket or make a hotel reservation or rent a car.
Provide a card to a family member, staff or associates.
Easily reloadable each time you need to give them fund.
Reload as often as you want up to the annual card load limit.
Save from paying high fees to transfer fund using company such as western union.

The card is a prepaid, reloadable travel cash card.
Safest and easiest way to carry your money during vacation.
Even if the card is lost or stolen, all of the funds are replaceable. Your Travel Card can be used at ATMs worldwide.
Always keep your Card and use it for your next travel. It’s better to be safe than sorry.

A prepaid, re-loadable card which your kids can use at any of the millions of ATM locations around the world.
Unlike a credit card, a prepaid card is limited to the amount of money that is loaded onto the card.
Further, parents can authorize others, family or friends to put money onto the Teen Card.
Definitely much more secure and faster way than giving cheque or cash.

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Labuan Tax

Labuan tax treatment able a Labuan entity to avail itself of treaty benefits. In compliance with international taxation standards, a Labuan entity is subject to tax under Labuan Business Activity Tax Act 1990 (LBATA), and supplemented by parallel Labuan legislation for Labuan companies and trust.

Annual Tax Return needs to be filed with the Malaysian Director General of Inland Revenue by 31st March of that year of assessment.

At Law & Commerce, we assist in the preparation and submission of companies’ annual tax return submission to the Inland Revenue Board of Malaysia (IRB) for our clients.

Economic substance regulation (ESR) requires Labuan entities undertaking Labuan business activities to demonstrate that they carry out substantial economic activities in the jurisdictions, in accordance with the Labuan Business Activity Tax Act 1990 (Act 445)

The Labuan entities, as specified in the list shall, for the purpose of Labuan business activity have:

(i) an adequate number of full time employees in Labuan; and
(ii) an adequate amount of annual operating expenditure in Labuan,

as prescribed by the Minister by regulations made under this Act.

The number of full time employees (FTE) and annual operating expenditure (OPEX) varies depending on the type of business activity.

Non-fulfillment of the required ESR, will eliminate a Labuan entity from qualifying for the minimum tax rate of 3% for Trading entities; or 0% for Non-Trading entities.

The full list of Labuan ESR based on business activity can be referred here.

A Labuan entity must carry out a business activity that is listed in the Substance Requirements [PU(A) 392 of 2018] for it to come under the ambit of LBATA.

The list of business activities are as follows:

Trading

Labuan insurer, reinsurer, takaful and retakaful;

2. Labuan underwriting manager or underwriting takaful manager;

3. Labuan insurance manager or takaful manager;

4. Labuan insurance broker or takaful broker;

5. Labuan captive insurer/takaful;

6. Labuan international commodity trading company;

7. Labuan bank/investment bank/Islamic bank/Islamic investment bank;

8. Labuan trust company;

9. Labuan leasing or Islamic leasing;

10. Labuan credit token or Islamic credit token company;

11. Labuan development finance company or Islamic development company;

12. Labuan building credit or Islamic building credit company;

13. Labuan factoring or Islamic factoring company;

14. Labuan money broker or Islamic money broker;

15. Labuan fund manager;

16. Labuan securities licensee or Islamic securities licensee;

17. Labuan fund administrator;

18. Labuan company management;

19. Labuan international financial exchange;

20. Self-regulatory or Islamic self-regulatory organisations

23. Other trading entity — Labuan entity that carries out administrative, accounting and legal services including backroom processing, payroll services, talent management, agency services, insolvency related services and management services.

Non-Trading

21. Labuan entity that undertakes investment holding activities other than pure equity holding activities;

22. Labuan entity that undertakes pure equity holding activities.

Note: There is still uncertainty and ongoing dialogue on the treatment of category 23. It is best that tax agent advise be obtained if your intended business come under this category.

If your company is a trading company, it is liable to pay 3% or 24% tax on net audited profit – depending on whether the required substance regulation is met. It is a requirement for a trading company to maintain adequate financial records, as well as to have their account audited for tax submission.

For non-trading company, the tax rate is either 0% (not taxable) or 24% of the audited profit (if substance regulation is not complied).

However if the Labuan entity carries a business activity that is not listed in the regulation, tax filing has to be done under Income Tax Act 1967 (ITA) instead of Labuan Business Tax Activity Act 1990. An appointment of a tax agent is required for filing under this Act.

Summary of tax return for Labuan entity:

ACCOUNTING & AUDIT

Perhaps one of the areas which is most commonly overlooked and often neglected is the requirement to prepare accounting records and where applicable to audit the company’s accounts. In most cases even if a company is not required to pay tax under the prevailing laws there will normally be a requirement that the company prepares or maintains account which can clearly demonstrate the company’s financial position. Not to do so not only may amount to non-compliance but also compromise the company’s standing.

From our experience accounting work is rarely expensive and we work with a number of qualified accountants to provide accounting services to your company.

Through our network of qualified accountants, we can offer weekly, bi-weekly, monthly or yearly accounting regular reporting services. Our accounting services covers all aspects of accounting and bookkeeping, including:-

Entry of transactions.
General Ledger.
Assets /Equipment Ledgers.
Expenses Ledger.
Accounts Receivables.
Accounts Payables.
Ageing Report & Summaries.
Bank Reconciliation.
Financial Statements Preparation.
Trial Balance.
Income Statement (Profit & Loss).
Balance-sheet.
Cash Flow Statement.
Periodic/Annual Reports.

The accountants are familiar with most industry standard software applications, and if required, we can work with other applications also. With our knowledge and experience in Bookkeeping and Accounting procedures we provide our service for all your Bookkeeping and Accounting needs, whether computerized or manual.

We also work with a few well-established audit firms through which speedy and cost-effective auditing may be performed. If you require our recommendation of Labuan approved auditors, please do not hesitate to contact us.

Accounts & audit: A Labuan company must keep its financial records which clearly show its financial position. This would mean keeping accounts up to trial balance at least. As per Labuan FSA, a Labuan company must maintain proper accounting and other records in Labuan. These proper accounting and other records shall be kept at the registered office and shall be open at all times for inspection. A copy of an audited account shall be lodged with the Authority within certain period.

Appointment of auditor: If your company is a trading company, or a non-trading company that does not comply with the required substance, an auditor must be appointed. This auditor must be “a Labuan approved auditor” as listed by Labuan FSA, which could be recommended on your request.

A Labuan company is now allowed to elect to be taxed under the ITA 1967 and pay tax at the rate that varies according to the year of assessment and the company’s paid up capital. This will enable the company to derive benefits from Malaysia’s numerous DTTs.

This election is irrevocable and if made will subject the company to all provisions under the ITA. Customers are advised to seek proper international tax advice before implementing this tax structure.

For companies that wish to elect for tax under ITA, an appointment of tax agent is required.

Summary of Tax, Accounting and Audit

	Taxing statute	Tax rate	Payment deadline	Is account required?	Filing of account to IRB	Filing of account to Labuan FSA
Labuan Trading entities	LBATA 1990	3% or 24%	On or before 31st March every year	YES	YES	YES
Labuan Non-Trading entities	LBATA 1990	0% or 24%	On or before 31st March every year	YES	YES for 24%	NO
Labuan entities electing for ITA 1967	ITA 1967	Tax rate varies with year of assessment and company’s paid up capital	Advance tax payable monthly	YES	YES	YES/NO

For a better understanding or clarification regarding the the tax return, accounting or audit requirement, please do not hesitate to contact our team.

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It should be noted that there are many channels from which employment pass may be obtained in Malaysia. Further there many categories of employment passes and clients interested to apply must seek proper advice to ensure use the right channels and categories. The write up below only deals with application for employment pass using Labuan company.

With effect from 31st of March 2015 major changes had been introduced by the Labuan FSA on the procedures to apply for employment pass. These changes had made it very difficult and uneconomical to apply for an employment pass using a Labuan company. To see the changes in detail please see;

New Guidelines on Employment Pass;

Licensed Entity Download
Non-Licensed Entity Download

Recently we have noticed a significant drop in the number of applicants wanting to apply for employment passes. If you still wish to apply you must have real and sustainable business to conduct. May we remind you that NO APPLICATION SHOULD BE MADE IF AN APPLICANT DOES NOT HAVE ANY REAL BUSINESS BUT ONLY TO SECURE RESIDENCE. If you are currently holding a student pass in Malaysia, we are not interested to have you as an applicant for an employment pass unless you can prove that you have real business in your own country.

Major requirements:

Minimum paid up capital if at least MYR250k or its equivalent in foreign currency
Physical office in Labuan

In making any new application or renewal of employment pass, Law & Commerce is obligated to make sure that;

application is genuine and not solely motivated by the desire take up residence in Malaysia,
applicant’s business is not conducted with residents of Malaysia,
application has a real business to be conducted, as evidenced by proven previous or current business,
applicant has the financial resources to support not only his Labuan company but his family whilst living in Malaysia,
applicant is fit and proper person for the post he is appointed,
the applicant and or his Labuan company is not involved in illegal or undesirable activities
applicant will not abuse his employment pass
the Labuan company remains in compliance with the laws
the expatriate registers for personal tax number, pays his personal income tax in Malaysia and file his personal tax return in Malaysia,
the applicant stands a better chance to renew for the next term

To ensure that applicant is genuine and is not purely used as a tool to get residence, Law & Commerce requires the applicant/Labuan company to take the following mandatory services;

Opening of corporate bank account
Payment of monthly tax deduction for expatriate,
Accounting service
Audit service

A) Law & Commerce’s fee (estimate)

Company formation: US$2750
Opening of bank account: US$800
Application for Employment Pass: US$1,500 per applicant
Application for Dependant Pass: US$800 per dependent
Renewal of Employment Pass: US$1,000 (after 2 years)
Renewal of Dependant Pass: US$300 per dependent
Annual accounting: US$600 min
Annual audit: US$600 min unless choosing to pay flat tax
Monthly tax payment and preparation of annual tax return: US$300
Certification and translation cost and other disbursements, if any, will be bill separately.

B) Fees payable to Immigration:

applicant pays RM600 for 2 years plus RM50 processing fee.
dependant pays RM180.00 for 2 years plus RM50 processing fee
journey performed fee, if required is RM500.00

Application for employment pass is now a complex issue. The procedures below serve as general guidance only. Different procedures may apply to different nationality.

An applicant must incorporate a Labuan company first and he provides documents/information below. Bank account must be opened simultaneously and once opened at least MYR250k or its equivalent in foreign currency be deposited. We are not able to submit your case UNTIL proof of such deposit is shown. The first stage involves applying for recommendation from the LFSA. If the LFSA recommends to the Immigration Department of Labuan that an employment pass be granted, then the second stage involves in submission of application to the Immigration Department of Labuan. If this application is approved, the applicant and dependant is any, are required to go to Labuan to have their passports endorsed. This approval, once granted is valid for 1 month.

A) Employment Pass

Completed Forms DP10 & DP 11 and such other forms required by Malaysian Immigration
clear copy passport of the applicant (only pages which have been stamped);
passport having validity of not less than 18 months,
address in Malaysia-this address is to be used as correspondence address, unless otherwise suggested,
4 copies passport size photographs; (white background)
your C.V;
your academic qualifications; (to be translated if not in English)
contract of employment stating;
- designation you are employed in or position in the company
- your monthly remuneration – not less than RM10,000.00,
- your duration of employment,
- your acceptance of the employment.
- letter from employer applying work permit for the employee;
- Malaysian income tax number, if any,
Letter of consent from the applicant to the academic/professional institution to give consent to Labuan FSA to verify the academic/professional certificate as and when required by Labuan FSA;
Latest organizational chart
Company profile detailing clearly at least the following;
- Nature of business to be conducted,
- Financial projection
- Products or services to be offered,
- Type of industries,
- Type of customers,
- Location of customers
- Expected annual turnover for the next 3 years
One professional reference from lawyer, accountant or other professional who have known you for at least 3 years and is familiar with your business,
OR
One business reference. The business reference may be from a supplier or customer who knows you or your business for the last 3 years.

Items 1, 8 & 9 will be prepared by Law & Commerce.

B) Dependant Pass

Immigration forms to be completed
clear copy of passport of your spouse/children;
2 copies of passport size photographs of spouse/children,
marriage certificate/ birth certificate of children;
where no marriage certificate is available, letter from own embassy conforming marriage;
letter from the work permit applicant requesting for dependant pass.

Items 1 & 6 will be prepared by Law & Commerce.

IMPORTANT NOTES:

Those documents that are in foreign languages other than English have to be translated and authenticated by own embassy.
For those applicants requiring entry visa, please state the name of the Malaysia Embassy/ High Commissioner Office where they are to apply for the visa.
Nationals from some countries may have to leave Malaysia and get their visa from nearest Malaysian Embassy. However this could be avoided by paying “journey performed” fee of RM500.00.
Applicant must be at least 27 years of age at the time of application in order to qualify. Exemption is given for ICT related industry where minimum age of 24 is allowed PROVIDED written proof of at least two years working experience in related ICT industries can be shown.
Successful applicant is required to Labuan, with his dependants, if applicable, once approval is given.

Incorporation of Labuan company takes 2-3 days after receiving complete documentation and payment. Corporate kit will take at least 1 week after company is incorporated.
Once Corporate kit is ready, opening of bank account takes at least 14 working days after submission of complete documentations. Some banks may take longer to approve.

Employment pass takes around 1 months to get recommendation from the LFSA and if there is no further documentation required. Client will need to book a appointment for travelling to Labuan to endorse your passport with Employment Pass sticker with Labuan Immigration. The date would need to be on either Tuesday, Wednesday or Thursday.

The trip to Labuan to endorse your passport with Employment Pass sticker can be done in just one day if the appointment are in the morning. If not, client will need to stay overnight to collect the passport the next day. However, this is subject to officer availability and the immigration in-house System condition.

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Pay bills on the go, purchase flight ticket or make a hotel reservation or rent a car.
Provide a card to a family member, staff or associates.
Easily reloadable each time you need to give them fund.
Reload as often as you want up to the annual card load limit.
Save from paying high fees to transfer fund using company such as western union.

The card is a prepaid, reloadable travel cash card.
Safest and easiest way to carry your money during vacation.
Even if the card is lost or stolen, all of the funds are replaceable. Your Travel Card can be used at ATMs worldwide.
Always keep your Card and use it for your next travel. It’s better to be safe than sorry.

A prepaid, re-loadable card which your kids can use at any of the millions of ATM locations around the world.
Unlike a credit card, a prepaid card is limited to the amount of money that is loaded onto the card.
Further, parents can authorize others, family or friends to put money onto the Teen Card.
Definitely much more secure and faster way than giving cheque or cash.

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