Taxation of Labuan International Companies Registered by Non-Residents

Labuan is an international offshore zone in Malaysia established on an island with the same name. This is not a classic offshore, so the companies registered here still pay certain taxes. Read the article to find out about all taxation options for companies in Labuan. 

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Four Taxation Options For International Companies Registered in Labuan

There are four corporate taxation options depending on the type of company registered in Labuan:

  • A holding structure that does not require any corporate taxes to be paid or mandatory audit to be conducted.
  • An export and import trade company that is subject to a 3% profit tax. The legal entity is required to conduct an audit.
  • An ordinary trading company can choose either a corporate profit tax at the standard rate of 3% or a single tax that makes up 20,000 ringgits a year (4,500 US dollars). The audit is not mandatory.
  • A non-trade company is exempt from taxes and audits if it receives income outside Malaysia.

If the holding company carries out trading activities at the same time, it automatically starts to pay a profit tax from all its income at a rate of 3%.

In Labuan, the trading activity includes:

  • commerce
  • banking
  • insurance
  • transportation services
  • management
  • licensing

Non-trading activity implies management and ownership of assets in the form of securities, shares, deposits, or any other property located in Labuan.

A company registered outside the offshore zone of Labuan in the territory of Malaysia is subject to standard tax rates:

  • annual income up to 500,000 ringgits (110,630 dollars) is subject to a profit tax rate of 19%
  • if it exceeds 500,000 ringgits, the tax is paid at a rate of 24%.

Discover how to register an offshore company in Labuan remotely with the help of our experts.

Profit Tax Benefits for Labuan Company Employees

In addition to low profit taxation, the companies registered in the offshore zone of Labuan have profit tax benefits for foreign employees. While foreign employees at a regular Malaysian company pay the profit tax at a rate of 28%, it is halved for Labuan company employees (14%). A foreign director of an offshore company is exempted from taxation on his income received in the territory of Labuan. However, it should be remembered that some countries, for instance, the USA, tax all foreign income of their residents.

Want to know more about the opportunities of Labuan as a destination for offshore company establishment? Here is the material for you.

Registration Fees and Activity in the Tax Haven of Labuan

The table below provides fees for company registration in Labuan by a non-resident depending on the type and amount of capital.

Number of paid capital in ringgitsCommission in ringgitsCommission in US dollars
Up to 50,0001,000222
from 50,000 to 1,000,0002,000443
from 1,000,0005,0001,107
Foreign company registration6,0001,328

The annual fee for offshore company renewal in Labuan amounts to 1,500 dollars.

Economic Substance Requirements

Tax benefits are only available to the offshore companies that can comply with substance requirements, which are as follows:

  • a physical office
  • employment of Labuan residents: 2 for a holding company, 3 for a trade company
  • annual operating expenses in Labuan: 45,000 dollars for a holding company, and 12,500 for a trade company

Our experts are ready to complete the whole process of Labuan offshore company registration for you on a turnkey basis: you will receive a legal address, we will employ a local secretary for you, and open corporate accounts with local banks or suitable foreign banking institutions.

An offshore company in Labuan is your key to the Asian and Middle East markets!

You can get in touch with our experts to open a corporate account in a Labuan bank remotely.

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