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Taxation for Companies in Labuan

Updated on Wednesday 28th November 2018

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taxation-for-companies-in-labuan.jpgLabuan is a special region of Malaysia, where companies are incorporated in a different manner than the one applicable in the rest of the country. Moreover, companies registered here are also subject to a different taxation system, which is more appealing to the investors, as the jurisdiction provides many tax exemptions and incentives. There are several types of companies which can be incorporated in Labuan and our team of company formation representatives in Malaysia can offer an in-depth presentation on the taxation regime applicable to each type of company. 
 
 

Legislative framework applicable to Labuan companies 

 
Investors interested in company formation in Malaysia should know that the businesses registered in Labuan benefit from a more favorable taxation system, applicable under the Labuan Business Activity Tax Act 1990. 
 
There are only several types of legal entities which can be incorporated here, and some of the most common are: 
 
  • •    trading companies;
  • •    non-trading companies. 
 
The legal framework provides a third type of company, Labuan Charged Company, which falls under the taxation system applicable in Malaysia and which can benefit from the provisions of the treaties signed for the avoidance of double taxation signed by the Malaysian authorities. Our team of company formation agents in Malaysia can offer more details on the way in which taxes are applied in this case. 
 
Here is a video that explains how companies are levied in Labuan
 

 

Corporate taxation system available in Labuan, Malaysia 

 
 
The taxation system applicable to Labuan companies is rather simple. In the situation of a trading company, the investor will have to pay a 3% tax on the company’s income (which has to be verified under a local audit) or pay a flat tax of RM 20,000 (no audit required). A trading company refers to businesses operating in the fields such as banking, insurance, trade, import, export, and others. Non-trading companies are not required to pay any tax on their income, and the same is applicable for dormant companies. 
 
Furthermore, regardless of the company type, the investors are exempted from paying the withholding tax of dividends, as well as on the capital gains. The local legislation does not prescribe a sales tax, but the goods and services tax (GST) is applicable for an income above RM 500,000. 
 
Investors are invited to contact our team of company incorporation consultants in Malaysia if they have questions referring to company registration in the Labuan region or on the taxation system imposed here. 
 
 

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