Labuan company registration

DOING BUSINESS IN LABUAN IN 2020

Since 2003, Healy Consultants Group PLC has assisted our Clients with starting their business in Labuan. Our services include i) Malaysia Labuan international company registration; ii) government license registration; iii) business bank account opening; iv) employee recruitment; v) visa strategies and vi) office rental solutions.

Summary table of Labuan company registration

SummaryLegally tax-exempt companyTurnkey solutionMoney broking companyRepresentative officeTrust
Also known asIBCShelf companyForex companyROTrust
Best use of company?International tradingClose a customer deal nowFinancial servicesMarketing & researchAsset protection
How soon can you invoice Clients/sign sales contracts?3 weeks2 weeks8 monthsCannot tradeCannot trade
How soon can you hire staff?3 weeks2 weeks3 weeks4 weeksCannot hire
How soon can you sign a lease agreement?1 week1 week1 week1 weekCannot lease
How long to supply corporate bank account numbers?6 weeks4 weeks8 months6 weeks6 weeks
How long to supply company registration/tax numbers?3 weeks2 weeks3 weeks4 weeks4 weeks
Corporate tax rate on annual net profits?3%3%3%Cannot tradeCannot trade
Limited liability entity?YesYesYesNoNo
Government grants available?YesYesYesNo

No
Government approval required for foreign owners?NoNoNoNoNo
Resident director/partner/manager/legal representative required?NoNoNoYesNo
Minimum paid up share capital?US$1US$1US$130,000US$1US$60,000
Can bid for Government contracts?YesYesYesNoNo
Corporate bank account location?BNP ParibasCIMB BankCitibankDBSMaybank
Can secure trade finance?YesYesYesNoNo
VAT payable on sales to local customers?Cannot trade locally0%0%Cannot tradeCannot trade
Average total business set up engagement costs?US$12,000Request a proposalUS$31,025Request a proposalRequest a proposal
Average total engagement period?3 months2 months8 months3 months3 months

Labuan company registration summary

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  • Advantages and disadvantages

    Advantages of Labuan company registration

    Labuan business registration advantage

    1. It is possible to register a Labuan offshore company with only one director and one shareholder, and they can be of any nationality. The minimum paid-up share capital is US$1, and our Clients do not need to travel to complete the engagement;
    2. Our Clients enjoy several tax benefits with offshore company registration in Labuan including:
      • 3% corporation tax on annual net profits;
      • Zero tax for companies conducting non-trading activities, such as holding companies;
      • No sales tax, VAT, custom duties or stamp duties;
      • No withholding taxes on i) dividends ii) royalties and iii) interest payments;
      • Non-resident directors of a Labuan offshore business pay no personal income tax on directors’ fees. By contrast, non-resident directors of onshore Malaysian companies pay 26% personal income tax on directors’ fees;
      • Labuan-based companies can take advantage of Malaysia’s double tax avoidance treaties with 68 countries including Canada, China, India, Singapore, and the United States;
    3. To curb tax evasion and other harmful tax practices, since January 2019 Labuan companies have been subject to new economic substance requirements. Labuan is both a Common Reporting Standard (CRS) and Base Erosion and Profit Shifting (BEPS)-compliant jurisdiction. Malaysia is also on the OECD ‘white list’ of jurisdictions adopting international standards of transparency and information exchange. Therefore, a Labuan company has an improving reputation for international business;
    4. Labuan has straightforward business registration procedures and compliance requirements. These include:
      • No requirement for a Malaysian shareholder. A key advantage of registering a Malaysia Labuan International company is that it can be 100% foreign-owned;
      • Clients personal details remain confidential. There is no public record of companies registered with the Labuan International Business and Financial Centre (IBFC);
      • Our Clients can be the sole director of a Labuan company even if not resident in Malaysia;
      • There are no trade license requirements for industries including i) e-commerce ii) import/export and iii) consultancy businesses;
      • Labuan offshore companies are permitted to open marketing offices in Kuala Lumpur and/or Johor Bahru, to i) facilitate Client meetings and ii) build relationships with potential Clients. Our clients often use a Labuan company to do business in Malaysia;
    5. Labuan is an established financial hub for companies looking to enter and expand into Asia, including those in the Islamic finance space;
    6. A Labuan offshore company is an ideal vehicle through which to conduct business in Asia because:
      • With a Labuan company, our Clients can open a foreign currency corporate bank account anywhere in Malaysia;
      • Through a Labuan company, our Clients can lease Malaysian office premises and secure Malaysia visas for expatriate staff;
      • Labuan labour costs are low (the minimum wage is only US$290 per month;

    Disadvantages of Labuan company registration

    1. Although Labuan is not blacklisted as a tax haven and has repositioned itself as a ‘midshore’ jurisdiction. Labuan companies face discrimination. For example:
      • Labuan offshore companies are considered less reputable than similar entities in Singapore and Hong Kong;
      • All Labuan companies are required to include ‘(L)’ in the name, which is undesirable for Clients who do not wish to reveal that their company was incorporated in Labuan;
      • Some countries that have a double taxation agreement (DTA) with Malaysia, such as Australia, the UK, and Japan have excluded Labuan from DTA benefits;
      • A Labuan company must subject financial statements to independent statutory annual audit;
    2. Labuan is an inefficient place from which to do business in Malaysia because:
      • Based on the company’s principal activities, it must maintain a certain number of staff in Labuan and commit to a minimum operating expenditure;
      • A Labuan company cannot open a Malaysian Ringgit corporate bank account. Local payments cannot be made or received in local currency;
    3. It is challenging to register a financial services company in Labuan because:
      • Annual financial license fees are up to US$30,000;
      • Labuan, and Malaysia in general, suffers from a dearth of qualified financial talent. Singapore and Hong Kong, Asia’s financial hubs, act as a magnet for top regional talent;
      • Malaysian assets held by Labuan companies may not be attractive to foreign buyers. Assets valued in Malaysian Ringgit are likely to lose value, because the Ringgit is a volatile currency;
    4. Companies which do not meet substance requirements are liable to pay a tax rate of 24% on taxable profits, as per the Income Tax Act 1967. Companies operating under the regulations of the Labuan Business Activity Tax Act 1990 are taxed at 3% of audited profits;
    5. Effective 1 January 2019, locally-incorporated Labuan entities, foreign entities registered in Labuan and limited partnerships engaging in i) holding company activities ii) banking business iii) distribution and service centre business iv) finance and leasing v) fund management vi) headquarters business vii) insurance viii) intellectual property holding and ix) shipping are required to employ local staff and lease a physical office.
  • Best uses of a Labuan company

    1. Labuan is an emerging Asian Islamic finance hub with a supportive sharia-compliant legal and regulatory infrastructure. A Labuan Islamic Islamic banking business is an excellent way to access the region’s ‘halal’ economy;
    2. Labuan is an emerging Asian FinTech centre. A Labuan FinTech business is ideally placed to access the region’s innovative financial services market, where demand for i) payments and currencies (crypto-currencies, currency exchanges, mobile money and payment apps) ii) software (to improve back and middle office processes) iii) platforms (crowdfunding, fund raising, secondary trading; and iv) data/analytics is growing;
    3. Labuan International Business and Financial Centre (IBFC) has ambitions to be the domicile of choice for FinTech business in Asia. IBFC welcomes FinTech businesses in areas including i) payments and currencies (crypto-currencies, currency exchanges, mobile money and payment apps) ii) software (to improve back and middle office processes) iii) platforms (crowdfunding, fund raising, secondary trading) and iv) data/analytics;
    4. Labuan is positioned as Asia’s captive insurance hub. The jurisdiction secured 50% of all captive formations in Asia in 2018 (Singapore secured 33% by contrast). Labuan IBFC is home to about 200 licenced insurance/reinsurance entities, providing a vibrant environment for captive formation and management;
    5. Labuan IBFC is the only Asian jurisdiction to offer a Protected Cell Company (PCC) structure;
    6. Because it is close to China and India, and the fact that it offers a balance of fiscal neutrality and an efficient tax network, a Labuan company is often used for the leasing of capital equipment, for example to serve the shipping, aviation and oil and gas industries;
    7. Labuan IBFC’s Global Incentives for Trading Programme is designed to attract commodity traders using Malaysia as a regional/international hub.

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Contact us

For additional information on our company registration services in Labuan, please contact our in-house country expert, Mr. Simon Guidecoq, directly:
client relationship officer - Simon
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