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Formation of A Labuan Trading Company and Tax

Totally new to Labuan Midshore Company? Here is the formation of a Labuan company and the tax guide for your understanding. Labuan Company formation is straightforward and it is done within 5-7 days upon receiving 3 simple documents from you! There are two main types of Labuan Company structure of either Trading or Non-Trading which differs based on the tax liability and flexibility. All Labuan Companies can transact in foreign currencies and in Malaysia Ringgit.

Formation of A Labuan Trading Company

Labuan Trading Company is defined to include commercial banking, investment banking, insurance, leasing, credit token, development finance, factoring, money broker, fund manager, securities, FinTech Blockchain, private fund, public fund, fund administrator, trust company, company management, international financial exchange trading (including Crypto Exchange) and other trading activities (administrative services, accounting services, legal services, backroom processing services, payroll services, talent management services, agency services, insolvency related services, management services, import/ export, consultancy, e-commerce businesses) other than non-trading activity.

Under the latest Labuan Business Activity Tax Act 1990 incorporating latest amendment Act 831 of year 2020, a Labuan Trading Company can enjoy the low corporate tax rate of 3% on net audited profits provided that substance requirements are met. All Labuan Trading Companies’ accounts must to be audited as part of compliance with the Inland Revenue Board in Malaysia.

Dealings with Malaysians and in MYR currency is now permissible too – however, the corporate tax rate will be 24% on net audited profits. If the Labuan entity is recognized as performing Labuan business activity, then the corporate tax of 3% on net audited profit may be allowed provided substance is met.

Labuan trading companies may also make an irrevocable election to be taxed under the onshore Malaysia Income Tax Act 1967 if they prefer. Under this election, the corporate tax rate will be 24% on net audited profit.

Formation of A Labuan Non-Trading Company

A Labuan Non-Trading Company is a structure relating to non-trading activities as holding of investments in securities, bonds, stock, shares, loans, deposits or any other properties. No tax and no yearly audit, except for management account, will be required for annual tax compliance.

Real estate investment in Malaysia held by a Labuan Company is considered a non-trading activity. However, if there is rental income receivable, the company will be subjected to onshore Malaysia Income Tax of 24% with the audited report is required. 

Labuan company that hold intellectual properties will be subjected to a 24% tax.

Shares Capital Structure for Trading and Non-Trading Company

All Labuan Companies shares are issued at par value of your choice with a direct allotment. These shares are issued to the shareholders can be an individual, a corporation or holding the shares by your appointed nominee or by a trust. The shares can be of different classes with different rights but non-bearer shares are allowed. All shares have to be denominated in any foreign currency except Malaysian Ringgit.

Depending on your needs, there are three (3) tiers of the shares capital you can choose to form your Labuan Company:

  • USD 1 – 12,000
  • USD 12,001 to USD 250,000
  • USD 250,000 

Most clients will opt for the first tier of USD 12,000 for their formation of their Labuan Company at the initial stage. At any time during the course of business, you can opt to subscribe to higher paid-up capital, with small additional registration fees payable to Labuan FSA and document preparation.

We provide “Labuan One-Stop Solutions” to all our clients, this service extremely helpful without the need to go to Labuan often or sourced elsewhere for solutions. Our Labuan company formation service ranging from simple registration to a more comprehensive structure including all types of license application and work permit for your expatriates if your business required. Feel free to plug on any one of our support services for your daily operation:

  • Advisory on the right entity to match your business nature
  • Advisory of company structure to realign to your group objectives
  • Advisory on wealth protection and succession
  • Advisory on fundraising activities and the structure
  • Power of Attorney
  • Auditor appointment and management
  • Annual tax filing and compliance
  • Company strike off management
  • Accounting services and billing
  • Tax Residence certificate
  • Daily operation management service for your operation
  • Mail management and forwarding
  • Telephone answering and forwarding
  • Office space from virtual to exclusive rooms
  • Personal Tax Filing
  • Payroll outsourcing
  • HR manpower recruitment and management

Should you require special service do let us know to specially tailor one for you, feel free to drop us an email at [email protected]

We provide One Labuan Platform to simplify your Labuan Company formation to meet your business objectives! Call +603 2783 9191 (Labuan Division) for an appointment or drop us an e-mail at [email protected] or fill up inquiry form and our team will get back to you!




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