Accounting and tax
- Corporate tax in Labuan is imposed only on trading companies at either i) 3% of net profits or ii) US$6,000 flat. Non-trading (investment holding) companies are not subject to tax. For comparison, Malaysia resident companies are subject to corporate tax at the rate of 18% for chargeable income below RM 500,000 and 24% for above this threshold;
- Capital gains are treated as regular corporate profits and there is no separate capital gains tax rate;
- Labuan does not impose any indirect taxes such as VAT, sales tax, custom duties and GST;
- Dividends, royalties and interests received by a non-resident from a Labuan company is exempt from withholding taxes;
- If the Labuan company pays corporate tax at 3%, then it would need to appoint an auditor and submit financial statements to the Labuan Financial Services Authority. Companies that pay a flat tax of US$6,000 are exempt from these requirements;
- Tax returns must be filed by the 31st of March, else a 10% penalty is imposed on the outstanding balance;
- There are no exchange controls imposed on Labuan offshore companies. However, they are not allowed to transact with Malaysian residents in Malaysian Ringgits, unless paying for administrative or statutory expenses;
- Employers are required to make monthly contributions to employees’ provident fund at 12% of their remuneration;
- Labuan based companies can take advantage of Malaysia’s double tax avoidance treaties with more than 73 countries including Australia, China, Singapore, U.K. and the United States;
- Healy Consultants will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records iv) preparing forecasts, budgets, and sensitivity analysis;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
Healy Consultants’ compliance department assists our Clients to fulfill all annual legal and tax obligations for Labuan offshore companies.
- A Labuan offshore company requires at least 1 director and 1 shareholder of any nationality. Both positions can be held by the same person;
- Offshore companies must appoint a Labuan trust company incorporated under the Companies Act 1965 and registered under the Labuan Trust Companies Act 1990. This trust must provide the offshore company i) a resident company secretary ii) a legal registered office. Healy Consultants will assist our Clients’ firm to appoint a suitable Labuan trust company;
- Prior approval is required from the Labuan FSA for companies engaging in certain business activities including i) Islamic financial services ii) banking iii) insurance iv) fund management v) leasing vi) factoring transactions and vii) accounting;
- An offshore company is not allowed to issue bearer shares;
- If the Malaysian word “Sdn. Bhd.” is used in the company’s name to denote limited liability, it must be preceded with an “L” to show that the company was incorporated in Labuan;
- Annual audit is required for companies electing to pay corporate tax at 3% rather than the fixed amount of US$6,000.
- The minimum wage in Labuan is US$245 per month;
- Employers are required to make monthly contributions of 12% of an employee’s remuneration to their employment provident fund. Failure to comply subjects the employer to i) 3 years of imprisonment and/or a ii) fine of US$3,000;
- Each marketing office of a Labuan company cannot have more than four employees;
- Standard working time is 48 hours a week. Companies must provide at least a 24 hour break to employees in a week;
- Companies with more than 40 employees are required to establish a joint labor-management safety committee that creates a safe, healthy workplace for workers;
- Notice period for employees who have with the company for i) less than 2 years, is 4 weeks ii) between 2 and 5 years is 6 weeks iii) more than 5 years is 8 weeks;
- Labuan companies are required to pay their employees termination benefits. The benefit amount can be up to 20 days’ wages for each year of service.
- Transactions with Malaysian residents must be notified to the Labuan FSA within 10 working days. However, transactions related to bookkeeping, leasing properties for the company’s operations and maintaining deposits persons carrying on business in Malaysia.