Setting up a Labuan FinTech business in 2024

Since 2003, Healy Consultants Group has been providing our multi-national Clients with Labuan business set up services in a variety of sectors. Recently, this included financial technology (FinTech) businesses to capitalise on Labuan’s emergence as an Asian FinTech hub.

Why set up a Labuan FinTech business?

• A Labuan FinTech business is ideally placed to serve Asia’s innovative financial services market, which includes i) payments and currencies (crypto-currencies, currency exchanges, mobile money and payment apps) ii) software (new processes which improve back and middle office processes) iii) platforms (crowdfunding, fund raising, secondary trading; and iv) data/analytics (technology which gathers and analyses data to produce information to improve businesses);
• Having approved eight FinTech businesses in 2018, Labuan International Business and Financial Centre (IBFC) approved more than 30 in 2019;
• As a territory of Malaysia, Labuan has a developed FinTech legal and regulatory infrastructure. Furthermore, Labuan FinTechs can access a number of key initiatives including i) the Security Commission of Malaysia’s Alliance of FinTech Community ii) Bank Negara Malaysia’s Financial Technology Enabler Group iii) the Fintech Association of Malaysia and iv) a Digital Free Trade Zone;
• Labuan’s tax regime appeals to digital businesses, which enjoy a minimum 3% tax on net profits per year. There is no withholding tax on payments to non-residents, and fees paid to non-citizen directors are tax-exempt;
• Registering a Labuan FinTech business with the regulator is straightforward, with no special licence required. The business needs only to obtain Labuan Financial Services Authority (FSA) approval for any proposed digital business if activities fall within the scope of the Labuan Financial Services Securities Act 2010 or Labuan Islamic Financial Services Securities Act 2010;
• Existing Labuan-licensed entities that want to include FinTech activities in their current business operations simply apply to Labuan FSA to advise of a change of business plan. The Labuan FSA will assess each application on merit;
• The Labuan FSA assists and advises FinTech applicants on their business proposals;
• The cost of living and doing business in Labuan is one third that in Singapore, Asia’s top Fintech hub;
• Labuan can be used as a vehicle to attract foreign funding. There are no restrictions on transactions conducted by Labuan entities with Malaysia residents, and there are no restrictions on transactions in Malaysian ringgit. The ability for Labuan entities to manage both RM and foreign currencies is unique in ASEAN;

Disadvantages of using a Labuan FinTech business

• The annual licence fee for a Labuan financial services company is US$30,000;
• There is a shortage of qualified FinTech talent (software developers, cloud engineers, network engineers, cybersecurity engineers, project managers and data scientists) in Labuan, and in Malaysia in general;
• Despite its growing influence on the FinTech stage, Labuan is not yet considered an established Asian global FinTech centre like Singapore or Dubai;
• Certain FinTech activities in Labuan IBFC are unregulated. These include i) provision of FinTech-related consultancy, advisory and management services ii) provision of FinTech-related Internet marketing services iii) provision of FinTech backroom processing;
• Labuan entities undertaking non-licenced FinTech-related business must still comply with Malaysian Anti-Money Laundering and Counter Financing of Terrorism Requirements issued by Malaysia’s Central Bank and Labuan FSA;

Please refer to this page for more information on the Advantages/Disadvantages of setting up a business in Labuan.

Setting up a Labuan FinTech business

• A Labuan bank or financial services provider is required to pay annual fees to the Labuan Financial Services Authority (LFSA) every January. These amount to i) a one-off US$350 licence processing fee and ii) a US$30,000 annual fee;
• A Labuan company must employ a local trust company to act as its incorporation agent. The agent will i) provide Labuan registered office and resident secretary ii) offer secretarial duties including lodging documents required under the Labuan Companies Act 1990.

Healy Consultants Group will efficiently assist our Client to establish their Labuan FinTech business and meet all regulatory requirements. Our services include i) applying for approval from the Labuan IBFC and Labuan LFSA ii) opening a corporate bank account for the business ii) assisting our Client to recruit qualified staff iii) assisting our Client to obtain visas for qualified staff iv) assisting with finding office premises. Healy Consultants local representative will complete all steps on your behalf. Our Client is not required to visit Labuan at any stage.

For more information on Labuan company registration steps, see this page.

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