LABUAN COMPANY INCORPORATION

A Labuan company is required to maintain its financial records and prepare its financial statements by the Financial Reporting Act 2013 and the Financial Reporting Standards. And all Labuan companies are required to have their financial statements audited by an approved auditor as per the Labuan Business Activity Tax Act 1990.

The Financial Reporting Act 2013 requires all Labuan companies to prepare their financial statements by the Financial Reporting Standards (FRS) issued by the Malaysian Accounting Standards Board. The auditing of the financial statements is an important part of ensuring that the financial statements are accurate and reliable. The auditor will assess whether the financial statements present a true and fair view of the company’s financial position and performance.

It’s important to note that a Labuan company that is not carrying on any business activity in Malaysia and the company is not holding any investment in Malaysia, then the company is not required to appoint an auditor and file its financial statements with the Labuan Financial Services Authority (Labuan FSA) and the Companies Commission of Malaysia (SSM).

Yes, it is possible to incorporate a company in Labuan without traveling there. The process can be done remotely with the assistance of a licensed Labuan Trust company or agent, such as Relin Consultants, who can act as your application agent. This can include handling the reservation of the company name, submitting the incorporation forms, and assisting with opening a corporate bank account.

However, it is important to note that certain documents may still need to be physically signed and notarized, such as the Memorandum and Articles of Association, consent letters and declarations from the directors, and others. These documents can be signed and notarized in your country of residence and then sent to the agent to be submitted to the Labuan authorities.

Yes, in addition to the requirement to have its financial statements audited, a Labuan company has other annual requirements that must be met to maintain its compliance with the laws and regulations of Labuan. Some of these requirements include:

• Filing of Annual Returns: Labuan companies are required to file annual returns with the Labuan Financial Services Authority (Labuan FSA) and the Companies Commission of Malaysia (SSM) within 42 days after the company’s anniversary date.
• Appointment of Company Secretary: All Labuan companies are required to appoint a Labuan resident company secretary within 30 days of incorporation and maintain this appointment throughout the company’s existence.
• Maintenance of Registered Office Address: Labuan companies are required to maintain a registered office address in Labuan, which can be a physical or virtual office or the office address of the company secretary.
• Compliance with the Labuan Business Activity Tax Act 1990: Labuan companies are subject to the Labuan Business Activity Tax Act 1990 and are required to comply with its provisions, including the filing of tax returns and payment of taxes.
• Obtaining and Renewing licenses: Depending on the type of business activity, some Labuan companies may be required to obtain and renew licenses from the relevant authorities.

Trading activities refer to the buying and selling of goods and services, as well as the import and export of goods. Non-trading activities refer to activities that are not directly related to buying and selling goods and services, such as holding assets, providing management services, and engaging in investment activities.

In Labuan, companies that engage in trading activities are subject to a higher rate of corporate tax (3%) compared to companies engaged in non-trading activities (0%). This is because the government wants to encourage non-trading activities as it is seen as more beneficial for the economy.

In summary, trading activities are buying and selling goods and services, while non-trading activities are activities that are not directly related to buying and selling goods and services like holding assets, providing management services, and engaging in investment activities. And in Labuan, companies that engage in trading activities are subject to a higher rate of corporate tax compared to companies engaged in non-trading activities.

Business activities in Labuan IBFC refer to the range of activities that companies can undertake within the jurisdiction. These activities can be broadly categorized into three main groups:

Trading activities include the buying and selling of goods and services, as well as the import and export of goods.

Professional activities, include providing management, consulting, and other professional services.

Investment activities, include holding assets, investing in securities, and engaging in other investment-related activities.

Companies operating in Labuan IBFC are required to be registered with the Labuan Financial Services Authority (Labuan FSA) and must comply with relevant laws and regulations. They are also eligible for various tax incentives, including a 3% corporate tax rate for non-trading activities and exemptions from withholding taxes on certain types of income.

The Labuan International Business and Financial Centre (IBFC) tax incentives are available to certain types of Labuan entities that are engaged in international trade or finance activities. These include:

• Labuan International Business and Financial Centre (IBFC) Company: This type of company is intended for businesses that are engaged in international trade or finance activities, such as trading, shipping, and financial services.
• Labuan Islamic Financial Services Authority (IFSA) Company: This type of company is intended for businesses that provide Islamic financial services and is subject to the same tax incentives as an IBFC company.
• Labuan Trust Company: This type of company is intended for providing trust and fiduciary services, and is subject to the same tax incentives as an IBFC company.
• Labuan Foundation: This type of company is a legal entity that can be used for wealth management, philanthropy, and other purposes.

It’s worth noting that the Labuan IBFC tax incentives are only available to companies that meet certain criteria and comply with the regulations and guidelines set by the Labuan Financial Services Authority (Labuan FSA). Companies applying for IBFC status must maintain a certain level of operational activities in Labuan and are required to submit an application to the Labuan FSA for approval.

The Labuan International Business and Financial Centre (IBFC) tax system is unique and attractive in several ways:

Low Tax Rate: Labuan IBFC companies are subject to a lower corporate income tax rate of 3% on their net income derived from their qualifying activities. This is significantly lower than the standard corporate income tax rate in Malaysia which is 24% for companies with taxable income of more than MYR 500,000.

Tax Exemptions: Labuan IBFC companies are exempt from withholding tax on interest, royalties, and dividends paid to non-residents. Additionally, there is no capital gains tax or sales tax in Labuan.

Double Taxation Agreements: Labuan has signed over 70 Double Taxation Agreements (DTAs) with other countries to mitigate the impact of double taxation for companies operating in Labuan.

Repatriation of Funds: The Malaysian government does not impose any restrictions on capital repatriation, providing flexibility for shareholders of Labuan IBFC companies.

Confidentiality: Labuan IBFC companies are subject to strict confidentiality laws which provide a high level of privacy and security for companies and shareholders.

Wide range of Business Activities: Labuan IBFC companies are allowed to conduct a wide range of business activities such as trading, shipping, and financial services, as well as Islamic finance and wealth management services.

Separation of Business and Operations: Labuan IBFC companies are allowed to conduct business activities outside of Malaysia while keeping their operations in Labuan.

These tax incentives and benefits make Labuan IBFC an attractive option for international businesses and investors looking for a tax-efficient and flexible jurisdiction for their operations.

A Labuan trading company is an International Business Company that is engaged in international trade activities such as buying and selling of goods and services, whereas a Labuan investment company is an IBC that primarily acts as an investment holding company and generates income from investments rather than trading activities.

Both types of companies can benefit from Labuan’s tax incentives, but the specific tax incentives and compliance requirements may vary.

Yes, a Labuan company can issue share capital in Malaysian currency (MYR).

Labuan companies are required to have their financial statements audited by an approved auditor as per the Labuan Business Activity Tax Act 1990.

The purpose of setting up a Labuan company is to engage in international trade or finance activities while benefiting from the attractive tax incentives and flexible regulations offered by the Labuan International Business and Financial Centre (IBFC).

Labuan companies can take advantage of lower corporate income tax rates, exemptions from withholding tax on interest, royalties, and dividends paid to non-residents, and flexibility in terms of foreign ownership and capital repatriation.

Additionally, Labuan companies can access a wide range of business activities such as trading, shipping, and financial services, as well as Islamic finance and wealth management services. Setting up a Labuan company also allows the separation of business and operations, as companies are allowed to conduct business activities outside of Malaysia while keeping their operations in Labuan.

A Labuan company is required to have at least one director to be incorporated. There are no restrictions on the number of directors a Labuan company can have and there is no specific resident director requirement in Labuan, any foreigner can act as the sole director and shareholder of the company. However, it’s important to note that the director(s) must be a natural person and not a corporate entity.

A Labuan company is required to have at least one shareholder to be incorporated. There are no restrictions on the number of shareholders a Labuan company can have. A Labuan company can be entirely 100% foreign-owned by an individual or corporate shareholder. The shareholder is also permitted to be the sole director. There are no specific requirements for a nominee shareholder in Labuan, like in some other jurisdictions.

No, it is not a requirement to appoint a Malaysian director. The director can be a foreigner.

Yes, the director and the shareholder can be the same individual.

The “ultimate beneficial owner” refers to the actual individual or entity that ultimately owns or controls a company, trust, or other legal entity, usually through a chain of ownership or control.

The information regarding the ultimate beneficial owner of a Labuan company is not publicly available, but it is required to be kept updated and reported to the Labuan Financial Services Authority (Labuan FSA) as part of the compliance with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations.

The companies are required to identify and verify the beneficial owners of the legal entities and to maintain accurate and up-to-date records of this information. The Labuan FSA has the power to access this information and to share it with other regulatory authorities upon request, in compliance with the international standard of AML/CFT regulations.

A Labuan company is required to maintain a registered office address in Labuan but it does not need to have a physical presence in Labuan.

The governing legislation for companies in the Labuan International Business and Financial Centre (IBFC) is the Labuan Companies Act 1990 (LCA) and its regulations. The LCA provides the legal framework for the incorporation, registration, governance, and dissolution of companies in Labuan IBFC.

It also sets out the requirements for maintaining corporate records and filings, as well as the responsibilities of directors and shareholders. In addition to the LCA, companies in Labuan IBFC are also subject to the Labuan Business Activity Tax Act 1990 (LBATA), which sets out the tax laws and regulations for companies operating in Labuan IBFC, as well as the Labuan Financial Services and Securities Act 2010 (LFSSA) which regulates the financial services sector in Labuan.

It’s important to note that companies in Labuan IBFC are also subject to the laws and regulations of Malaysia, such as the Companies Act 2016, and to international standards on anti-money laundering (AML) and countering the financing of terrorism (CFT).

To register a Labuan company in Labuan International Business and Financial Centre (IBFC), you will need to pay several fees. Some of the main fees include:

• Reservation of Company Name: RM50
• Incorporation fee: RM6,000
• Annual return fee: RM1,000
• Annual license fee: RM5,000

The process of incorporating a Labuan company typically takes about 5-10 business days, once all the necessary documents and fees have been submitted. However, the actual time frame may vary depending on the complexity of the application and the availability of the necessary documents.

The first step is reserving the company name, which can typically be approved within 24 hours of application. Once the name is approved, the agent acting on your behalf will be able to submit the incorporation forms to the Labuan authorities. This can take a few days for the forms to be processed.

After the company is incorporated, you will receive a copy of the Certificate of incorporation. Once the certificate is issued, you can proceed with opening a corporate bank account, a Visa application for a non-resident director or employee, and other compliance and regulatory requirements.

It’s important to note that these time frames are just an estimate and it may vary depending on the case, so it’s recommended to consult a legal advisor or professional to ensure compliance with the laws and regulations of Labuan and to get the most accurate time frame for your specific case.

Yes, a Labuan Company can employ Malaysians.

Yes, a Labuan company can be terminated or dissolved. The process for doing so is outlined in the Labuan Companies Act 1990 and the Labuan Business Activity Tax Act 1990. It typically involves submitting a notice of termination or dissolution to the Labuan Financial Services Authority and completing any outstanding tax or regulatory requirements.

Yes, a Labuan offshore business can conduct business activities in Malaysia, subject to certain conditions and regulations.

An offshore company in Malaysia refers to a company that is incorporated in Malaysia, but operates primarily outside of the country and is primarily owned by non-residents. These companies are typically used for international trade or investment activities and are eligible for certain tax incentives and benefits.

Offshore companies in Malaysia are typically incorporated in the Labuan International Business and Financial Centre (IBFC), which is a special economic zone in Malaysia that offers a unique legal and regulatory framework for international businesses.

Labuan IBFC companies are subject to lower corporate income tax rates, exemptions from withholding tax on interest, royalties, and dividends paid to non-residents, and flexibility in terms of foreign ownership and capital repatriation. Additionally, Labuan IBFC companies can access a wide range of business activities such as trading, shipping, and financial services, as well as Islamic finance and wealth management services.

A Labuan company is required to file an annual return to the Labuan Financial Services Authority (Labuan FSA) within 42 days of its financial year-end. The annual return must include financial statements, audited by a registered auditor, and a declaration by the director(s) that the company is solvent. In addition, an annual fee is payable to the Labuan FSA.