All Labuan companies are governed by the Labuan Companies Act 1990 (“LCA”) and companies incorporated in Labuan, carry out either trading or non-trading activity in, from or through Labuan. The LCA requires the engagement of services of a Labuan IBFC registered trust company to act as its incorporation agent. For your information, Kensington Trust Labuan Limited (“KTLL”) is a licensed trust company in Labuan.

A. Incorporation Procedures
  1. Reservation of company name.
    A Labuan company shall have any of the following words as part of its name:-
    • “Corporation”, “Incorporated”, “Corp.”, “Inc.”
    • “Limited”, “Ltd.”
    • “Public Limited Company”, “P.L.C.”
    • “Societe Anonyme”, “Sociedad Anonima”, “S.A.”
    • “Aktiengesellschaft”, “A.G.”
    • “Naamloze Vennootschap”, “N.V.”
    • “Perseroan Terbatas”, “P.T.”
    • “(L) Berhad”, “(L) Bhd.”, or
    • in romanized characters, any word or words in the national language of any country which connote a joint stock company limited by shares, or any abbreviation thereof

    If the proposed name is similar to that of a related or associated corporation, a written consent letter has to be obtained from the said corporation. A sample of such consent letter will be provided upon request.

    The client may choose any name, but the Labuan Financial Services Authority (“Labuan FSA”) has the discretion to reject the name if it is undesirable or involves a name that the Registrar is not willing to accept. Name reservation application with the Authority is within 24 hours and if the proposed name is approved, it shall be reserved for a period of three (3) months from the date of the lodging of the application.

  2. Once a name is reserved, KTLL will prepare the incorporation documents which comprise of the Memorandum and Articles of Association of the proposed company and consent in writing to be appointed as director(s) of the company (“Incorporation Documents”). For activities that require licensing such as banking, insurance/insurance-related, public fund management, leasing, factoring and company management, prior approval must be obtained from the Labuan FSA prior to incorporation.

  3. KTLL is obligatory to take reasonable steps and conduct customer due diligence when establishing business relationship with any customer. Upon satisfaction of our customer due diligence exercise and receipt of the duly signed Incorporation Documents, KTLL will submit the documents to the Registrar together with payment of the relevant registration fee. The registration fee depends on the proposed paid-up capital of the Labuan company as follows: -

    • RM 50,000 and below
    : RM1,000
    • RM 50,001 and RM 999,999
    : RM2,000
    • RM 1 million and above
    : RM5,000

  4. Upon lodgement of complete documentation and payment of fees as well as clearance from the due-diligence process conducted by the Labuan FSA, a Labuan company can be approved for incorporation or registration within 24 hours. A certificate of incorporation of a company will be issued by the Authority in due course.

B. Key Corporate Features of Labuan Companies
Share Capital
Permitted Currencies Any foreign currency except Ringgit Malaysia
Standard currency US$
Minimum issued capital One (1) in any denomination in foreign currency
Authorised capital N/A
Par / Nominal value N/A

Directors
Minimum One (1)
Corporate directors Allowed
Local directors requirements Optional
Location of meeting Anywhere
Minimum numbers of meeting Per Articles of Association
Publicly accessible records No

Shareholders
Minimum One (1)
Bearer shares No
Corporate shareholders Allowed
Local shareholders requirements No
Location of meeting Anywhere
Minimum numbers of meeting One (1) annually
Publicly accessible records No

Company Secretary
Minimum One (1)
Requirements A resident secretary who must be a Trust Officer of a trust company OR a Labuan / Malaysian domestic company wholly-owned by the Labuan trust company

Registered Office
Requirements Principal office of a trust company in Labuan

Accounts
Records Kept in Labuan
Preparation of accounts Yes
Audit requirements and filing Optional, but required for Labuan companies opting to pay tax at 3% p.a. on the audited net profits and also, licensed companies
Publicly accessible records No

Annual Requirements
Annual Return Not later than 30 days from the anniversary date of incorporation of the Labuan company
Annual Government Fee On or before the anniversary date of incorporation of the Labuan company
Tax Filing Annual tax return needs to be filed with the Malaysian Director General of Inland Revenue by 31 March of that year of assessment. Normally, an extension of time for filing is allowed by the Inland Revenue.

Taxation
Trading activities RM20,000/- OR 3% of net audited profits
Non-trading activities Nil
Trading and Non-trading activities RM20,000/- OR 3% of net audited profits
Others No withholding tax, no capital gain tax, no stamp duty on offshore instruments

General
Legal System Common Law
Corporate Redomiciliation Yes
Double Taxation Treaty Access Yes
Exchange Control No

C. Labuan IBFC Tax System

Labuan Business Activity Tax Act 1990 (“LBATA”) governs the imposition, assessment and collection of tax on a Labuan business activity carried on by a Labuan entity in, from or through Labuan. Only Labuan entities carrying on a Labuan business activity are able to take advantage of the provisions under LBATA. Labuan entities that carry on a non-Labuan business activity are subject to the provisions of the Malaysian Income Tax Act, 1967 (“ITA”).

    “Labuan business activity” means:
  • a Labuan trading or a Labuan non-trading activity carried out by a Labuan entity;
  • activities carried on in, from or through Labuan;
  • business currency other than Malaysian currency;
  • activities carried out with non-resident or with another Labuan entity

“Labuan non-trading activity” means an activity relating to the holding of investments in securities, stock, shares, loans, deposits or any other properties by a Labuan entity on its own behalf. Such activity is not subject to tax under LBATA.

“Labuan trading activity” includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity. The Labuan entity shall pay either 3% of net profits as per audited accounts OR RM20,000/- upon election annually.

Labuan entity carrying on both Labuan trading and non-trading activities will be deemed to be carrying on Labuan trading activities. Hence, it will have the same tax treatment as those undertaking Labuan trading activity mentioned above.


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The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.