The Federal Territory of Labuan is a Malaysian offshore jurisdiction that offers a wide range of business opportunities in all prolific industries. A simple company formation process
and a beneficial tax structure are among the advantages of foreign investors in Labuan
who can set up different types of companies, in respect with the Labuan Companies Act 1990 (LCA 1990)
Investors can open several types of companies, which are detailed below in this article, however, foreign investors prefer to open an international business company, the IBC, a business type that is suited to the needs of foreign entrepreneurs.
What types of companies can I register in Labuan?
Below, we highlight the main types of legal entities that are available for incorporation for those who wish to open a company in Labuan. Investors can reach out to our agents for more details about each of these business forms.
Foreigners can set up the following types of businesses in Labuan:
• international companies in Labuan (IBC): the main type of company used in this jurisdiction, allows for 100% foreign ownership.
• private company limited by shares: a private company that can be either limited or unlimited and can be considered exempt when the shares are not beneficially owned by any corporation.
• public company limited by shares: these companies can offer their shares to the public and can be listed on the stock exchange.
• private company limited by guarantee: the members are liable up to a certain amount; used by non-profit organizations.
• offshore limited partnership: has one general partner and no more than 20 partners, the fields of activity are restricted.
• branch: an extension of the parent company abroad, performing the same types of activities in Labuan.
• Labuan trusts: offshore trusts that can be structured as a chosen legal entity type, subject to the Labuan Offshore Trusts Act.
Labuan companies are registered under the rules of LCA 1990 and must carry the operations in compliance with this important set of laws.
A company in Labuan has the following characteristics:
- it has one director and one resident secretary;
- no minimum capital and no authorized capital imposed by law;
- the shares have no nominal value and it can have treasury shares but no bearer shares;
- it must have a registered office in Labuan, the office of the resident secretary;
- privacy is ensured: information about the management of the business or its business transactions it not disclosed to third parties.
- legal entities can merge.
The Labuan company enjoys a set of tax advantages, as described in the Business Activity Tax Act and as detailed below by our specialists in Labuan company formation. Those companies that intend to become involved in certain activities need to obtain special permits and licenses. For example, these are required for banking, insurance, fund management, company management, leasing and other financial activities. The list of special permits can also extend beyond the financial sector, and our Labuan offshore company specialists can provide investors with adequate details.
Upon registration, the Labuan company shall use the services of a trust company which will act as the incorporation agent. This will mean that the following services are offered: the registered office and registered secretary, the secretarial duties and the submission of documents, the appointment of a trust officer as a resident director and resident secretary.
How can I set up an IBC in Labuan?
A Labuan international company or IBC
as it is known is a popular business structure for investors from abroad. This type of company can be registered under the rules of Labuan International Business and Financial Center by at least one shareholder and a minimum share capital of $1. Being offshore companies, these can be wholly foreign-owned, they are subject to several tax benefits and they can operate on the market without licensing requirements. IBCs in Labuan
are usually met in the financial sector.
The company needs to have a unique name and investors are required to prepare a set of documents for registration. Our Labuan company formation experts can assist investors while they draft the Memorandum and Articles of Association. Other additional documents, such as the identification documents belonging to the shareholder/director and the consent to act as director will be required.
How do I open a limited partnership in Labuan?
A limited partnership in Labuan (LP) can be registered by at least two members, one general and one limited, each one of them with particular liabilities in the firm. Among the documents and conditions imposed for registering an LP in Labuan, we mention the following:
• the partnerships’ name needs to comprise the letters LP and the end of it;
• a Labuan trust company needs to be appointed for registering an LP in this jurisdiction;
• a partnership agreement needs to be provided at the time of company incorporation for an LP in Labuan;
• the registration fee for a limited partnership in Labuan is approximately RM1,000 or $300.
Information about Labuan trust companies
Labuan trust companies
can be formed in compliance with the rules of Labuan Financial Services Authority (LFSA) and no need for capital. The liabilities of trustees in such company are mentioned in a trust deed, the important document which stands at the base of a Labuan trust company formation
. We remind that Labuan trust companies
can perform fiduciary services, can act as agents for business administration, can offer asset management services on request and can legally take care of a firms’ duties among many others.
The advantages of offshore companies in Labuan
Business persons from overseas have numerous reasons to consider when setting up offshore companies in Labuan
. For instance, such entity is incorporated in approximately one working day, it is exempt from taxation, there is no need for bookkeeping and related matters, and audits are not imposed. Each offshore company in Labuan
is registered with the Articles of Association and the Certificate of Good Standing.
An IBC in Labuan is subject to an advantageous corporate income tax of 3% for trading activities and it can deal with Malaysians. Compared to the Labuan tax for companies, a Malaysian legal entity is subject to a 24% standard corporate income tax rate with a reduced, lower rate can apply to small and medium sized companies under certain conditions.
Labuan is an established financial center, with a number of banks and financial companies present on the market, as highlighted in the following 2018 statistic:
- total number of Labuan banks in Q2 of 2018: 56;
- 40 investment banks and 16 commercial banks were present on the market in 2018; our of these, 3 were Islamic Banks and 2 were Islamic Investment Banks.
- in the second quarter of 2018, there were 213 insurance and insurance-related companies, our of which 42 were reinsurance companies and 13 were general insurance companies.
- the number of leasing companies in Q2 2018 was 365.
The figures were provided by the Labuan Financial Services Authority. Investors who need information about licensing for these particular business sectors, as well as others, can reach out to one of our agents for further information.
Investors who open a company in Labuan benefit from the tax advantages under the local laws, as well as from a streamlined registration procedure. While the IBC remains the most widely used business form, entrepreneurs who wish to open a different type of company can reach out to our experts for further details about the requirements, as well as the advantages and other recommendations.
Our team of company incorporation agents in Labuan
can help foreigners register their businesses in a fast and reliable manner, so please do not hesitate to contact us
at any time.