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Set up a Branch in Labuan

Updated on Thursday 27th February 2020

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Branches in Labuan are registered with the Companies Commission in Malaysia and represent a legal business structure that operates under the rules and regulations of the parent company. The registration of a branch in Labuan is an easy process that can be properly handled by our team of company formation agents in Labuan for all foreign investors who want to enter the Malaysian market.
 

How can I register a branch in Labuan?

 
Branches in Labuan are operating through limited liability companies, the most popular business structure available, and are incorporated under the rules of Companies Commission in Malaysia. The registration process starts once the Articles of Association are provided to this institution. These important documents must contain information about the parent company, about the activities which will be placed in Labuan, the name of the owners, the board of managers and the capital contribution.
 
The branch registration and compliance requirements may be subject to regulations if this business form is opened in a certain field. For example, when an investment bank opens a branch in Labuan, it must provide a letter of undertaking from the parent company abroad through which it is made clear that the head office acknowledges that it will be liable for the operations of its Labuan branch.
 
The liability of the parent company is a particularity that needs to be taken into consideration when deciding to open a branch or a subsidiary. Our Labuan company formation specialists can provide complete details on the current requirements that apply to branches in general as well as any particular licensing or reporting requirements that may apply in specific business fields that are subject to a higher degree of regulation in Labuan. We can also provide detailed information to those investors interested in making an application with the Financial Services Authority (FSA) for registering a branch. In addition to the liability acknowledgment, other documents will be required to register the branch of an investment bank or another financial institution. Among these, we can mention the business plan, three-year financial projections, audited accounts, a letter of consent from the country of origin’s regulatory authority as well as details about the composition of the Board of Directors. These requirements for submission may differ from one case to another. We strongly advise investors who are interested in opening a branch of a financial institution to reach out to us for more details. We can also provide assistance for other business fields of interest.
 
We invite you to address to our company incorporation specialists in Labuan who can help you set up a business in this offshore jurisdiction. You can also ask for information about how you can set up a Labuan trust company.
 

What are the authorities which offer approvals for your branch in Labuan?

 
Most business structures in Malaysia, including in Labuan, are approved by the Inland Revenue Authority, Labuan Financial Services Authority, the Central Bank of Malaysia and the Malaysia Immigration Department.
 
As previously mentioned, some branches may be subject to additional licensing and control, like those in the financial sector. Investors can reach out to our Labuan offshore company specialists for details.
 
 
The advantages of opening a branch in Labuan.png

What are the steps for opening a branch in Labuan?

 
Among the important steps of opening a branch in Labuan as a foreign company, we mention the following:
 
  • apply for a work permit visa as a foreign entrepreneur in Malaysia;
  • prepare the Articles of Association with information about the branch in Labuan;
  • provide complete information about the parent company which intends to set up a branch in Labuan;
  • open a bank account for the minimum share capital and future financial operations of the branch;
  • appoint a representative agent and the board of managers for the branch in Labuan;
  • register for tax purposes and social contributions in Malaysia.
Please keep in mind that these steps are only general ones that include a brief description. For more details, please reach out to our Labuan company formation agents.

What are the main benefits of branches in Labuan?

Branches in Labuan are treated as an extension of a foreign company that is interested in expanding its operations in Labuan and Malaysia.  The branch is a completely dependent structure and any business decision of a Labuan branch is usually subject to acceptance of the parent company and only then implemented by the local branch.
 
Labuan branches, like any other business structure set up in this Federal Territory, are not subject to corporate taxes. This is a very important advantage for all investors interested in opening a Labuan offshore company.
 
Other benefits to opening a branch in Labuan include minimum tax filing obligations (when a company pays 3% on its Labuan trading activities audited accounts are required as part of these obligations).
 

Branch requirements in Labuan

 
Apart from observing the requirements for proper registration and licensing, branches are also subject to the tax return requirements for companies in Labuan. These include preparing a statutory statement and filing the tax returns by 31 March each year. A difference is made between trading and non-trading activities in Labuan, with the trading ones including banking insurance, import/export or shipping. Non-trading ones refer to holding activities.
 
Branches of foreign companies involved in the provision of goods and services in Malaysia are subject to the goods and services tax applicable in the country, including for activities related to importing goods into Malaysia. One of our Labuan company formation agents can provide investors with more details if their business activities in Labuan will also include imports in Malaysia. 
 

Investments in Labuan

 
We list some of the key investment and market evolution highlights, according to a market report for 2018 presented by the Labuan International Business and Financial Centre:
 
  • - 12.5%: the growth of new company incorporations in Labuan compared to the previous year; Japanese, Chinese and South Korean investors remain the top ones.
  • - 1,059: the number of new companies in 2018 in Labuan.
  • - 60.1%: of the total Labuan companies originated from Asia and the Pacific Region in 2018.
  • - 12.8%: an increase of companies opened by investors from the Far East, as compared to the previous year.
 
The growing number of companies is a reflection of Labuan’s position as a business center that has much to offer to foreign investors. While Asian investors retain a majority, investments from the Far East, Europe, and America have also increased in recent years. 
 
If you would like to know more about how you can set up a branch in Labuan or about how you can open a Labuan offshore company, we invite you to contact our team of company formation representatives in Labuan.
 
 

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