Frequently Asked Questions (FAQ) about Labuan Offshore Companies

How to set up a Labuan company in Labuan International Business Financial Centre?

A Labuan company can be incorporation in Labuan IBFC but it must be done via a Labuan trust company.

Besides the payment of relevant fees (based on paid-up capital), the official documents that should be submitted together with the application are the Memorandum and Article of Association of proposed company, consent letter to act as director and the statutory declaration of compliance by the trust company.

What is the definition and difference of trading and non-trading activities?

Non-trading activities are those activities relating to investment holdings in form of securities, stocks, shares, loans, deposits or any other properties by a Labuan entity on its own behalf.

On the other hand, trading activities under Labuan IBFC definition include trading, management, licensing, shipping operations, banking, insurance or any other activity which is not a Labuan non-trading activity.

What is the definition of business activities in Labuan IBFC?

According to Labuan IBFC, Labuan business activities is defined as Labuan trading or non-trading activity, transacted in non-Ringgit, carried out with residents or non-residents.

What will be the tax rate for business activities in Labuan?

Labuan companies involved in trading activities will be imposed with tax rate of 3% of audited net profits or fixed rate of RM20,000.

Which Labuan entities can apply for Labuan IBFC tax incentives?

All types of Labuan entities registered under Labuan IBFC get to enjoy the tax incentives.

What is unique and attractive about the Labuan IBFC tax system?

Apart from the numerous tax incentives for Labuan entities, here are some other unique features of the Labuan tax system

  • Fewer tax filing requirements
  • Perpetual tax exemptions
  • No estimation of income and bi-monthly deductions
  • Labuan entities may take advantage of Malaysia’s Double Taxation Agreement (DTA)
  • Labuan entities can Invest in domestic companies while enjoying tax exemptions accorded in Labuan IBFC
What is the difference between Labuan trading company and Labuan investment company?

Investment companies are usually incorporated to hold assets or shares in companies that are located in other jurisdictions.
Trading companies, on the other hand, are companies that carry out business operations on a day to day basis.

Any requirements on minimum capital and shareholding?

One share is required as the minimum. There are no other minimum capital requirements. Labuan companies may issue shares of different classes or rights except for bearer shares, which is not allowed. The shares can be denominated in any currency EXCEPT Malaysian Ringgit.

An offshore company is required to have at least one shareholder, who may be an individual, a corporation or a trust company holding the shares as a nominee, or on trust.

Any audit requirements?

Labuan company must maintain proper accounting and other records in Labuan and it is to be kept at the registered office of the company in Labuan. Such accounting and other records are to be kept open and available at all times for inspection purposes by a directory of the company.

What is the purpose of setting up a Labuan company?

You can read about some of the common reasons why people choose to set up a Labuan company

What is the composition requirements in a Labuan company for directors and secretaries?

For a Labuan company, there must be at least one director who can fill in the role as both the resident director and resident secretary.

Does a Labuan company need to be physically present in Labuan?

No. However, they are required to engage the services of a Labuan trust company, which will serve as their registered office in Labuan instead.

Can bank accounts be opened using a Labuan company?

Yes. Labuan company can be used to open foreign accounts and with banks in and outside of Labuan.

Is the Labuan IBFC subjected to exchange control?

No. Labuan companies and its operations are free from exchange control regulations when dealing with non-residents.

What is the governing legislation for companies in Labuan IBFC

Labuan Companies Act 1996

What are the fees payable to register a Labuan company in Labuan IBFC?

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