FAQ on Labuan Company Taxation
The FAQ on Labuan Company Taxation will answer your concerns about taxation issues and compliance of a Labuan Company. Labuan Company Taxation is simple and straight forward with a fixed annual fiscal tax structure! Here are some commonly asked questions for your further understanding :
Labuan Company does not require a tax agent to file tax returns to Inland Revenue for all offshore transactions. As your Trust Company, We can act and file your Labuan Annual Corporate Tax on your behalf. Labuan companies are required to file their annual tax to the Labuan Inland Revenue Board in Labuan.
Labuan Companies with dealings with Malaysian residents
For Labuan companies that have dealings with Malaysian residents, they will need to file their taxes to the local Inland Revenue Board. In such cases, a local licensed Tax Agent is required to be appointed. The agent will submit the audited financial report to local Inland Revenue Board on your behalf. These companies shall be assessed under the Income Tax Act 1967 for tax purposes.
Four (4) tax options for Labuan Company are as follow:
a) For Non-Trading Company (investment holding) – zero tax and no audit report
b) For Trading Company will be taxed at a rate of 3% on net audited profits
c) For Dormant Company – zero tax and no audit report
d) All Labuan companies can opt to have a Permanent Election to be taxed under Malaysia Local Tax (ITA 1967). The current corporate tax rate is 24%.
The Labuan Entity would not be eligible to enjoy the LBATA Tax preferential treatment e.g. tax rate of 3%. Consequently, it will be taxed under ITA.
The 3% tax rate takes effect on 1 January 2019 in relation to the Tax Filing for year assessment 2020. The election of RM20, 000 or 3% tax is still available for income earned prior to 1 January 2019.
The key benefit is that the Labuan Company can take advantage of the Double Tax Treaties that Malaysia signed with more than 70 countries. The full list of the DTAs shall be available to them, if they chose to elect to be taxed permanently under the local Malaysia Income Tax Act 1967. For more information please visit our page on Malaysia DTAs for Labuan Entities here! or visit the Malaysia Inland Revenue website at www.hasil.gov.my
The deadline for all Labuan Tax filing is by 31 March every year. At the sole discretion of the Labuan Inland Revenue Board, a Labuan company may apply for extension of submission deadline up to 31st July. For more information on Labuan company corporate tax compliance, please click here!
It is best to set at 31st December every year, this avoids the absence of basis-period.
Yes, freely in Ringgit, please click here!
No tax for foreign funds remitted into Labuan company.
SST not applicable dealings with international and Labuan entities. However, SST registration is mandatory with Customs Malaysia once you have a first annual turnover of RM500,000 dealing with Malaysian entities with a tax of 6%
Under the Inland Revenue Board’s law, all companies are to keep their accounting records for 7 years.
Feel free to drop us an inquiry to advise if Labuan company fit to meet your objective in Malaysia with advice on the right structure for your Labuan Company set-up.
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