Labuan Tax Benefits : Incentives and Exemptions


Why you should consider managing and planning for your wealth, succession planning and charitable foundations in Labuan

Tax Incentives

The following income is exempted from income tax:

  • Dividends received from Labuan entities
  • Distributions received from Labuan trusts and foundations (including both Islamic) by the beneficiaries
  • Distributions of profits by Labuan partnerships (including Islamic partnerships)
  • Interest received by residents*, non-residents* or another Labuan entity from a Labuan entity.
  • Royalties and fees for services, advices or assistance specified in Section 4A (i) and (ii) of the Malaysia Income Tax Act 1967 (ITA), received by a non-resident or another Labuan entity from a Labuan entity.
  • Other gains or profits under Section 4(f) of ITA received by a non-resident from a Labuan entity

No withholding tax is imposed:

  • on payments to non-residents for  interest, royalties, fees for services, advice or assistance, or other gains or profits under Section 4(f) of ITA by a Labuan entity
  • on payments to non-residents for use of moveable properties by a Labuan licensed leasing company.

Tax Exemptions

  • Tax exemption on directors’ fees received by a non-citizen individual in his capacity as a director of a Labuan entity.
  • Tax exemption on 50% of gross income received by a non-citizen individual from exercising an employment with a Labuan entity in a managerial capacity, in Labuan or at its marketing or co-located offices approved by Labuan FSA.
  • Tax exemption on 50% of gross housing and Labuan Territory allowances received by a Malaysian citizen from exercising an employment in Labuan with a Labuan entity.
  • Tax exemption on 65% of the statutory income of any person providing qualifying professional services such as legal, accounting, financial and secretarial services, rendered in Labuan by that person to a Labuan entity.

Stamp Duty Exemption

Stamp duty is exempted on all instruments executed by a Labuan entity in connection with a Labuan business activity, including its memorandum of articles/constituent documents and on transfer of shares in a Labuan company.

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