Labuan is a special region of Malaysia, which acts as one of the main offshore centers in Asia. Over the years, the region has become very attractive for the foreign businessmen who wanted to open a company in Malaysia
, due to its taxation regime
and the business incentives provided to those operating a business in Labuan
. Businessmen can incorporate several types of legal entities in this jurisdiction and our team of company formation representatives in Malaysia
can offer assistance on the registration of a Labuan company
, as well as legal advice on the entities which are suitable for a designated business activity.
What legal entities can be incorporated in Labuan, Malaysia?
Foreign investors who are interested in company formation in Malaysia can choose from two main types of companies that can be incorporated in Labuan, as prescribed by the main rule of law available for this jurisdiction, which is the Labuan Companies Act of 1990. Companies set up here are registered as offshore ones and they can take the following forms:
• trading companies: import or export companies are included in this category and investors benefit from tax advantages in Labuan.
• non-trading companies (also referred to as holding companies): these are used for owning shares in subsidiaries located in other countries.
The legal entities are registered following the same simple incorporation procedure, but it is important to know that they are liable to a different taxation system and they need to fulfill different requirements. Offshore companies
that are registered in Labuan
can have 100% foreign ownership and our team of company formation agents in Labuan
can provide more details on this matter. You may request information and support if you want to open a company in Labuan
How can I open an IBC in Labuan?
Labuan International Company or IBC as it is known is a preferred business structure chosen by foreign investors who are interested in tax advantages in this offshore jurisdiction. The registration of an IBC in Labuan is simple, and it starts as soon as the activities are set up, and the name is chosen. Also, institutions like the Inland Revenue Authority, Labuan Financial Services Authorities or the Central Bank of Malaysia will make the necessary approvals for an IBC in Labuan. Having 100% foreign ownership is a solid benefit for entrepreneurs from abroad who decide for investments in Malaysia. Besides that, 1USD is the minimum share capital for opening an IBC in Labuan. In matters of taxation, the 3% rate represents the flat fee imposed on the company’s profits generated in Labuan. Moreover, an IBC in Labuan is protected by a series of double taxation treaties signed by Malaysia with countries worldwide.
Below, we summarize once again the main characteristics (and requirements) for a Labuan company:
Management: the company must have at least one company director and a resident secretary.
Office: the company is required to have a registered office in Labuan, which may be a virtual office as described below.
Capital: there is no requirement for a large minimum share capital for the Labuan company; the usual amount is 1 USD.
Shares: although the company may not have bearer shares, treasury shares are allowed and the company can have different classes of shares.
For those investors interested in Labuan company formation, our team offers special services related to the incorporation of legal entities. We can assist entrepreneurs in drafting the Memorandum and Articles of Association as well as the director and shareholder statements and other declarations when needed. Once the documents are finalized, we can help make the submission for registration. The company founders will also be required to apply for a work permit and this is granted when the individual will occupy a top management position. The permit can also be granted for other company members, such as for those in the middle management or for technical experts. One of our agents can provide you with more information about the work permit requirements for foreigners in Labuan. As a final step, we can assist in opening a bank account. This will require a different set of documents and submissions and investors may be required to open the bank account
in person, as per the selected bank’s regulations.
An alternative to company formation in Labuan is purchasing a ready-made company. This has several advantages, such as the fact that the business already has a chosen name and no checkup is required.
The advantages of Labuan international company
One of the ways of starting a business in this region is by setting up a Labuan international company
. This type of legal entity does not have any restrictions on the nationality of its founders. It can be set up with 100% foreign ownership. Furthermore, the capital requirements for this business form are low, as the company may be set up with a minimum share capital of only $1.
Also, this structure can be incorporated by a single shareholder, who may also act as a director. Our team of agents can offer more details on the commercial legislation applicable in Labuan.
The procedure for company registration in Malaysia in the region of Labuan
exempts such businesses from obtaining licenses and permits
in the case of the following activities:
• consultancy companies.
The main reasons why investors can choose to open a company in Labuan are listed below:
- simple incorporation requirements: this business structure is a simple one that only requires one director and one shareholder and they can be the same person.
- low incorporation costs: the taxes and costs associated with setting up a company in Labuan and a residential address are low; as stated before, the minimum paid-up capital for the company needs to be only 1 USD.
- low tax: the corporate income tax for a company in this special region is low and in some cases, companies are completely exempt from the profits tax; our Labuan offshore company agents detail the taxation principles below.
- fast incorporation: the general incorporation of a Labuan company lasts seven days at the most and can be accomplished even if the foreign investors cannot be present in Labuan during the entire procedure.
Tax exemptions in Labuan, Malaysia
Labuan is a tax-friendly region, in which companies can benefit from numerous tax exemptions. For example, a legal entity is not required to pay the goods and services tax (GST) for sales transactions and it also qualifies for an exemption on the withholding tax of dividends and interest.
The corporate income tax rate for a Labuan company is differentiated according to the type of activity. In this sense, some business activities are favored, meaning that they are subject to a low tax or they are tax exempt. An investment holding company is subject to zero tax in Labuan while a company involved in trading activities is subject to a profit tax of 3% or 20,000 RMN. These values apply when the company trades on the ASEAN market; when the Labuan company trades on the Malaysian market the corporate income tax for trading activities is the usual 24% applicable throughout Malaysia. One of our Labuan company formation agents who specialize in taxation matters can give you more details about these differentiated taxation regimes according to the company’s activity.
Companies set up in Labuan are not subject to a capital gains tax and the double tax treaties signed by Malaysia will generally also apply in case of Labuan companies. One of our Labuan company formation specialists can give you more details about the provisions of these treaties.
It is also important to know that the Labuan company can have a corporate bank account opened in other regions of Malaysia.
There are other benefits, including those referring to the visas the investors (and their families) have to obtain when relocating here for business purposes.
Labuan is not only a tax-advantageous financial center but is also a preferred location for traders and investors because it offers easy access to other areas and markets. Entrepreneurs who open a company in Labuan are located fairly close to Hong Kong and China, Indonesia, India or Tokyo, all o these locations being of interest for many foreign investors. By setting up a company in Labuan, they can enjoy the advantages of being closely located to these important markets, with minimum corporate taxes and requirements for their business.
What are the documents for company formation with the Trader Register in Labuan?
Among the documents necessary for company registration in Labuan
as a foreign investor we mention the Articles of Association, the statutory declaration of compliance, specific forms offered by the Trade Register
to the managers of the firm and the consent to perform activities as directors of the company in Labuan.
Also, the business license is necessary if your firm will perform certain activities, for example, in the banking sector. Our team of company incorporation in Labuan
is at your disposal with assistance throughout the entire registration process of your business in Labuan
When do I receive the approval for my company in Labuan?
The Trade Register in Labuan, alongside with the institutions in charge of granting the approval for business in this offshore jurisdiction can accept the incorporation documents within one working day, meaning that the company is registered for business.
Company verification with the Trade Register in Labuan
Entrepreneurs and natural persons in Labuan
have the possibility of verifying a particular company
with the Trade Register in Labuan
. The registration number or the name of the business is usually necessary for a company verification with this institution. The reasons why a verification is sometimes suggested is to find out information about a specific company, details about its shareholders, liabilities, debts, minimum share capital, date of incorporation, etc.
Taking advantage of complete privacy
Just like most of the offshore jurisdictions, Labuan
offers complete protection for foreign investors who open companies. This means that information about the shareholders, about the managers and company beneficiaries are not publicly displayed. Complete anonymity and confidentiality are provided for companies in Labuan
as long as the owners are not subject to a criminal investigation or a criminal record.
A virtual office for your business in Labuan
Many investors from abroad decide for virtual office services in Labuan
instead of opening a traditional office. Such services are at a fraction of costs compared to a normal business office, and more than that, the company will benefit from the services of a virtual assistant who will take care of the daily activities in the firm: mail, phone calls, faxes, business meetings, etc. Your company in Labuan
can benefit from complete virtual office services
, so do not hesitate to get in touch with our team of company formation representatives in Labuan
for complete details in this matter.
Options for foreign investors
Investors will wish to open a company in Labuan, however, they can also set up a trust or a foundation when they need to have an entity in Labuan that is used for asset protection purposes. Below, our team highlights the main characteristics of the company, the trust and the foundation and one of our agents is able to help investors with more information, if asset protection is their main target.
The company: it is founded by the shareholder who, under the Labuan laws, may remain anonymous. The company has legal personality and it is controlled by the Board of Directors. The main constitutive documents are the Articles of Association. It can be used for trading and investment purposes as well as for asset protection.
The foundation: It has legal personality and it is controlled by a Council of Officers. The Charter and the Articles of Registration and the main constitutive documents. It can be used for asset holding and for distributing assets.
The trust: it is formed by the settlor and the owners of the assets are the trustees. It has no legal personality, but it is based on a fiduciary duty between the settlor and the trustee. It is used for holding and distributing assets for the beneficiaries.
Our Labuan offshore company specialists can help investors with more information about each of these business forms as well as the laws governing them. We can assist during the incorporation process. Entrepreneurs are welcomed to reach out to us for a consultation.
Main advantages of a Labuan company
Companies registered in Malaysia traditionally require a business associate who is a local citizen. The commercial legislation available in Malaysia allows the incorporation of a company with 100% foreign ownership, a regulation which is also applicable in Labuan. An important aspect is that a company in Labuan does not need a director who is a national citizen of Malaysia, as the commercial regulations stipulate that the investor can also act as the company’s shareholder, as well as the company’s director.
The minimum share capital of a Labuan company is established at USD 1. Moreover, the company registration in Malaysia can be completed in maximum two weeks and it is not required for the investor to be present in the country throughout the incorporation stages. The Labuan legislation does not impose the following taxes:
• sales and services tax;
• goods and services tax;
• withholding tax on dividends;
• withholding tax on interest;
• capital gains tax.
There are also no audit requirements unless the company is operating in several industries, such as banking or insurance.
A company in Labuan can be successfully used for asset protection purposes. For example, an offshore company can be used for protecting real estate investments as well as intellectual property. There is no capital gains tax and no inheritance tax in Labuan and this is why a company can be used to hold overseas properties. For intellectual property companies, the Labuan legal entity can be the one assigned to own the copyrights, trademarks and patents or know-how used by other companies, the original holders. They can sub-license the rights to the Malaysian legal entity. Individuals who own assets in different jurisdictions can use a Labuan offshore company as a holding company as a manner of minimizing probate. This allows for an easy transfer of ownership or succession because, as stated above, there is no inheritance tax and the transfer can take the form of a shares transfer.
Companies in Labuan can be used for a variety of business purposes. Moreover, the fact that they can be easily incorporated, as well as the fact that the requirements are not cumbersome, makes them very attractive to foreign investors.
8 reasons for opening a company in Labuan
Here are 8 reasons why you should open a company in Labuan
, presented by our team of attorneys in Malaysia
Fully foreign-owned company: a company incorporated in Labuan, Malaysia, can be fully owned by a foreign investor. This means that there is no need to have a local Malaysian partner, as it is the case in some other parts of the country. The Labuan International Company has these very appealing characteristics, one of the main reasons why foreign investors choose to base their operations here.
Very low paid-up capital: another important characteristic for the Labuan International Company is that it has low requirements for the paid-up capital. The amount needed is a minimum of 1 USD, a very low requirement and one that allows investors to benefit from a minimum business start-up expenditure. Other types of companies in Malaysia will have different requirements.
Simple company structure: a Labuan International Company is a type of legal entity that has simple requirements in terms of corporate management and control. A simple business structure is possible for this business form: one director and one shareholder are needed for incorporation and they can be one and the same person. Moreover, the Labuan International Company can be used for asset and wealth management.
Fast incorporation: the entire incorporation process is a speedy one, with only approximately 7 days needed for the completion of the registration with the SSM, the Malaysian Companies Commission. One of our lawyers in Malaysia can help you during this registration process and you can also commence the incorporation even if you are in your country of residence.
No Goods and Services Tax: there is no goods and services tax, or GST on sales transactions performed in this jurisdiction. The GST in Malaysia is the equivalent of the value-added tax, an indirect tax that applies to the sale of goods and services. Its usual rate is 6 percent and it is one of the taxes payable by all companies in Malaysia incorporated in other regions like Kuala Lumpur.
Other tax exemptions: Labuan is a jurisdiction that offers a host of tax exemptions for locally registered companies. Apart from the GST exemption, there are no withholding taxes on dividends, interest, royalties, management and technical fees. This broad tax exemption policy is an important advantage for all foreign investors in Labuan.
No special permits and licenses: the Labuan International Company does not require special trade licenses for activities that include trading, import and export, e-commerce and consultancy. This is an advantage because foreign investors can skip one of the formalities required in all other cases when opening a company in Malaysia: obtaining the special permits and licenses once the registration is complete with the SSM.
Special profit tax for a Trading Company: another important advantage from a taxation point of view is the fact that the company can choose to pay either a 3 percent profit tax per year or a fixed amount that represents a pre-determined flat fee. This yearly taxation scheme is available for the Trading Company in Labuan. Our attorneys in Malaysia can give you more information.
Businessmen interested in receiving more details on the advantages of a company registered in Labuan are invited to contact
our team of company formation specialists in Labuan