All Labuan companies are governed by the Labuan Companies Act 1990 and companies incorporated in Labuan, carry out either a trading or a non-trading activity in, from or through Labuan.
Labuan companies share the following corporate characteristics:
|Permitted Currencies||In any foreign currency except Ringgit Malaysia|
|Minimum share issue||One share in any denomination in foreign currency|
|Annual fees||Regulatory Fees;
USD800 for Labuan companies
USD1,500 for Foreign Labuan companies
|Residency requirements||Resident director is optional|
|Meetings/frequency||Per Articles of Association|
|Bearer shares||Not allowed|
|Public share registry||There are no public records of Labuan companies|
|Meetings/frequency||Yes, at least one annually|
|Annual return||Filed annually not later than 30 days from the anniversary of the date of the incorporation of the Labuan company|
|Audit requirements||Optional, but required for Labuan companies opting to pay 3% tax per annum on audited net profits and licensed companies such as banks, insurance entities and trust companies|
|Registered office||Yes, must be in Labuan, which shall be the principal office of a Labuan trust company|
|Domicile||Change in domicile is permitted|
A Labuan company:
Additional characteristics of a Labuan company:
Malaysian residents are permitted to establish Labuan companies and with limited notification to Labuan FSA (post transaction), Labuan companies can deal with Malaysian residents.
In addition, Labuan companies can own controlling stakes in a Malaysian domestic company and transactions conducted by a Labuan Company must be in currencies other than Malaysian Ringgit (MYR), except as permitted by the relevant legislations and authorities.
A Labuan Trading Company can be defined as a Labuan Company which conducts trading activities. The definition of a Labuan trading activity is found in Section 2 of the Labuan Business Activity Tax Act 1990 which states a "Labuan trading activity" includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity.
Sections 4 and 7 of the same Act provides that Labuan Trading Companies have a yearly election of either paying a flat tax rate of MYR20,000 per annum, or 3 per cent of audited net profit.
A Labuan Non Trading Company can be defined as a Labuan Company which conducts non trading activities, which is defined in Section 2 of the Labuan Business Activity Tax Act 1990, as activity relating to the holding of investments in securities, stock, shares, loans, deposits or any other properties by a Labuan entity on its own behalf. Section 9 of the same Act provides that Labuan Non Trading Companies are not subjected to tax.
A company registered under the Labuan Companies Act 1990 can make an irrevocable election to be taxed under the Malaysian Income Tax Act 1967, which allows it more secure access to treaty benefits signed between Malaysia and other countries. It's worth noting that Malaysia has close to 80 treaties, one of the largest tax treaty networks in Asia Pacific.
Under Malaysian Income Tax Act 1967, corporates are taxed at 25%, however all foreign-sourced income is exempted from tax. In addition, there is no capital gains tax, except for transactions involving certain landed properties in Malaysia.
The role of a Marketing Office is limited to facilitate meetings with clients and to establish contacts with potential
clients. No maintenance of books and records (including trading activities) shall be done through, from or in the Marketing
All Labuan companies, including those licensed under the laws relating to financial services in Labuan IBFC may apply to set-up a Marketing Office in Kuala Lumpur and/or in Johor Bahru.
Labuan companies that have an existing Kuala Lumpur Marketing Office may also apply to establish another Marketing Office in Johor Bharu. With the exception of insurance brokers and captives, all Labuan companies with such a Marketing Office are required to maintain a Management Office in Labuan.
In line with the Malaysian government's move to liberalise the financial sector, Labuan Holding companies were permitted to set up an operational and management office in the capital city of Kuala Lumpur.
A co located Labuan Holding company in Kuala Lumpur brings with it an array of practical benefits, such as accessibility to all the largest markets in Asia and access to the infrastructure, human capital, professional advisors and service providers, as well as recreational and residential facilities that are available in Kuala Lumpur.
Trust company refers to a company registered under the Labuan Companies Act 1990 and satisfies requirements detailed in Section 62 the Labuan Financial Services and Securities Act 2010.
The role of Labuan trust companies is to incorporate, register, manage and conduct secretarial duties for entities registered under the Labuan Companies Act 1990, Labuan Limited Partnerships and Limited Liability Partnerships Act 2010, Labuan Foundations Act 2010 and Labuan Trust Act 1996.
Hence, a Labuan Trust Company must itself be registered by an existing Labuan trust company or a Labuan Managed Trust Company.
In addition a Labuan trust company may provide:
It may also act as directors, secretaries, agents, officers of a Labuan foundations, company or entity and may also make available any of its trust officers for appointment as resident director and resident secretary to a Labuan company or entity. A Labuan trust company may also act as manager to a managed trust company or a private trust company.
It is a requirement that a trust company establishes a functional office in Labuan and have at least two approved trust officers, one of whom is domiciled in Labuan. The trust officers are employees of the trust company who have met Labuan FSA's requirements of a trust officer, which includes fulfilling the fit and proper person criteria and passing an exam set by Labuan FSA.
Other activities that a trust company may carry out include being a trustee, agent, executor or administrator pursuant to the objectives of the trust company. A company that seeks to register itself as a trust company must itself be a company incorporated or registered under the Labuan Companies Act 1990. The name of the company shall include the word 'Trust', 'Trustee' or other such words as approved by the Registrar.
Leasing means the business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer, regardless whether the lease is with or without an additional option to subsequently purchase the said property, or other such business as approved by the Minister of Finance, Malaysia.
This reference to property includes any plant, machinery, equipment or other chattel attached or to be attached to the ground. With the exception to the transportation of passengers or cargo by sea or the letting out on charter of ships on a voyage or time charter basis, Labuan leasing companies are allowed to carry on leasing of ships on a "bare boat" basis.
All Labuan leasing companies are regulated under Section 86 of the Labuan Financial Services and Securities Act 2010 and are deemed Labuan Trading Companies as defined in Section 2 of the Labuan Business Activity Tax Act 1990. As such, all Labuan leasing companies have a yearly election of either paying a flat tax rate of MYR20,000 per annum or 3 percent of audited net profit.
An application for leasing in Labuan will be considered from a Labuan company incorporated or registered under the Labuan Companies Act 1990 or a Special Purpose Vehicle which facilitates leasing transactions, including inter-company transactions.
As much as half of the world's capital is estimated to flow through international business and financial centres, making banking activity the most important in these centres.
Labuan International Business and Financial Centre has grown to become the home for more than 60 banks, including 14 investment banks up to the end of 2010.
ABanks licensed to operate in Labuan can conduct transactions with Malaysian residents as of January 19th, 2010. Under the co-location guideline issued in early 2010, Labuan banks can now co-locate an office (or offices) in any part of Malaysia.
This liberalisation is expected to drive the sector to even greater growth as banks that previously did not have a presence in Labuan now have a tremendous opportunity to do so given the added incentive of operating onshore.
All Banking entities set up in Labuan IBFC are governed and regulated under the Labuan Financial Services and Securities Act 2010, Part VI, specifically provisions contained in Sections 87 to 100.
All Labuan registered Banks, are deemed Labuan Trading Companies as defined in Section 2 of the Labuan Business Activity Tax Act 1990, and have a yearly election of either paying a flat tax rate of MYR20,000 per annum, or 3 percent of audited net profits.
Labuan banks are in the business of providing credit facilities and receiving deposits, investment banking service, building credit business, credit token business, development finance business, leasing business or such other activities as approved by Labuan FSA.
All Labuan Banks are not allowed to accept deposits or provide withdrawals in cash.
Labuan Islamic business is the business of receiving deposits on current account, deposit account, saving account or any other account in compliance with Shariah principles as may be specified by Labuan FSA, conduct Labuan Islamic financial business as defined under Section 60 of Labuan Islamic Financial Services and Securities Act 2010 including the following business in compliance with Shariah principles:
Labuan investment banking is defined under the Labuan Financial Services and Securities Act 2010 as the business of:
Labuan Islamic investment banks are allowed to operate as full-fledged Islamic banks except accepting deposits. The followings are the range of businesses allowed to be undertaken by a Labuan Islamic investment banks:
Labuan investment banking is defined under the Labuan Financial Services and Securities Act 2010 as the business of:
Eligible Labuan banks and investment banks were accorded the flexibility to establish their office or offices in other parts of Malaysia other than their offices in Labuan under the co-location guideline issued in 2010.
A Labuan Bank given approval to establish a Co-located Office under this Guideline must continue to have an office in Labuan with suitable number of staff to perform the functions assigned to the Labuan office. The application for approval to set up the Co-located Office must be submitted to Labuan FSA prior to its establishment.
The application for approval under this Guideline can be made by any Labuan Bank licensed under the Labuan Financial Services and Securities Act 2010. Each applicant has the choice between the two co locating options below, subject to compliance with pre-determined criteria:
The Labuan bank may carry out any operations at the Co-located Office, except for the following which will remain in Labuan:
The applicant bank must have:
The Labuan bank may only carry on specific operations as may be approved by Labuan FSA, apart from marketing activities.
All other operations to be retained in Labuan.
The applicant bank has been in operation in Labuan for not less than three (3) years at the time of the application.
Labuan Bank that co-locates under this Guideline is allowed to conduct the following business activities at the Co-located Office:
A Labuan Protected Cell Company is a limited company which has been separated into legally distinct cells, which allows the assets and liabilities of individual cells to be separated from one another. This flexible structure allows each cell to own part of the company's overall share capital whilst at the same time maintaining sole ownership of its own distinct cell. Legally each Protected Cell Company is deemed a single entity.
All Labuan Protected Cell Companies are regulated under the Labuan Companies Act 1990, Part VIII(B), specifically provisions contained in Sections 130N to 130 Z(C) and are deemed Labuan Trading Companies as defined in Section 2 of the Labuan Business Activity Tax Act 1990. As such, all Protected Cell Companies have a yearly election of either paying a flat tax rate of MYR20,000 per annum, or 3 percent of audited net profits.
A Protected Cell Company is incorporated as a Labuan Company or may be converted from an existing Labuan Company limited by liability, and has the ability to form 'cells'. These cells of a Protected Cell Company may comprise:
As such, the provisions of the Labuan Companies Act 1990 apply with the necessary modifications required to create the cells of a Protected Cell Company. (These modifications are dealt with in the later part of this section).
Neither the core cell nor the individual cells created are deemed separate legal entities, nonetheless, each cell remains legally separated from any other cell and each has sufficient attributes to carry on business independently under the 'umbrella' of the Labuan Protected Cell Company.
A Protected Cell Company therefore has the ability to hold assets or investments segregated into numerous classes to cater for differing objectives of individual investors, while at the same time preserving the independence of each cell.
A Labuan Protected Cell Company can be designed to conduct:
All three businesses may be conducted under either the conventional system or in accordance with Islamic principles, by ensuring Sharia compliance in all its dealings. As such Protected Cell Companies relating to Takaful, Islamic Captives and Islamic Funds, must ensure all Sharia principles relating to their businesses segments are adhered to. Please note however that the following requirements detailed below relate solely to conventional captives.
The Labuan Financial Exchange (LFX) was established as a cost effective and practical alternative to existing exchanges in the region. It has proven itself to be an efficient funding mechanism for international companies operating in Asia-Pacific. Wholly owned by Bursa Malaysia, LFX plays a complementary role with respect to its parent company, in attracting international investors to the country.
Among the many advantages of LFX for global investors are the ability to list both conventional and Islamic instruments, the availability of multi-currency securities and instruments, flexibility of trading and freedom from selective controls.
Timely approval for licensing and listing applications, subject to conditions being metSingle point of contact with statutory regulators via the Labuan Financial Services Authority (Labuan FSA) Access to information 24 hours a day, due to its being an Internet-based trading platform.
For further information, click here to go to LFX website.
|Malaysia International Ship||Malaysia Ship|
* To qualify under LBATA, the shipping company must be incorporated or registered under Labuan Companies Act 1990
Please refer to the links below to obtain more information about shipping, licensing and registration:
The Global Incentives for Trading (GIFT) programme is a framework of incentives for traders of specified commodities to use Malaysia as their international trading base to undertake international commodity trading business in Labuan IBFC.
The international commodity trading business under the GIFT programme is the trading of physical and related derivative instruments of
in any currency other than Ringgit.
Under the GIFT programme, a Labuan International Commodity Trading Company (LITC) must be established and licensed by the Labuan Financial Services Authority (Labuan FSA). An annual licence fee amounting to RM40,000 is payable to Labuan FSA upon the grant of licence. The LITC is allowed to establish its operational office(s) anywhere in Malaysia.
A LITC is required to meet the following criteria after five (5) years from the date of license:
LITCs will be subject to a corporate tax rate of 3% of chargeable profits as reflected in the audited accounts under the Labuan Business Activity Tax Act 1990 as per the relevant exemption order. Further, a LITC set up purely as an LNG trading company would be entitled to a 100% income tax exemption on chargeable profit for the first three (3) years of its operation provided the company is licensed before 31 December 2014. Thereafter, the LITC will be subject to the abovementioned 3% corporate tax rate.
There are other tax exemptions for LITCs as follows:
Towards the establishment of LITCs, the Labuan FSA has issued a guideline detailing the parameters relating to the establishment and operation of LITCs under the GIFT programme and available for download below. Kindly note this version of the guideline dated 1 January 2013 supersedes the version issued on 31 October 2011.
Existing Labuan companies currently undertaking the trading business in petroleum and petroleum-related products including LNG are required to be licensed as an LITC by 30 June 2013.
Existing Labuan companies that are currently undertaking trading business in the specified commodities other than petroleum and petroleum-related products including LNG are required to be licensed as an LITC by 31 January 2014.
|LITC - Guidelines|
|LITC Company Annual Update Submission Form|
The governing legislation for establishment of Labuan partnerships is the Labuan Limited Partnerships and Labuan Limited Liability Partnerships Act 2010 and Shariah-compliant partnerships are governed by the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA), under Part X, Section 111 to 112.There are two forms of partnerships in Labuan IBFC, namely:
All Labuan limited partnerships and Labuan limited liability partnerships are expected to carry on business in any currency other than the Malaysian currency except as permitted by the relevant authorities.
A limited partnership is a business entity comprising two or more partners who operate or manage a business together. The minimum number of partners for a Labuan limited partnership is two partners i.e. one general partner and one limited partner and the maximum number of partners allowed is 50 partners.
Partners may be a corporation except for firms which are set up to offer professional services, in which case, it must consist of natural persons and supplemented with professional indemnity insurance coverage issued by an insurer approved by Labuan FSA.
a) General Partner
A general partner shall have all the rights and powers and shall be subjected to all the restrictions and liabilities of a partner. Therefore, they have management control; share the right to use partnership property; share the profits of the firm in predefined proportions; and have joint and several liabilities for the debts of the partnership.
b) Limited Partner
A limited partner contributes capital to the partnership but do not participate in the daily operations of the company. The limited partner shall not be liable as a general partner unless the limited partner participates in the management of the Limited partnership.
The general process for registering a limited partnership involves the following:
A limited liability partnership is a corporate body formed vested with the powers of a natural person and has legal personality separated from its partners. The partnership has perpetual succession and any change in the partnership shall not affect the existence, rights or liabilities of the Labuan limited liability partnership. In addition to having a common seal, the Labuan limited liability partnership is capable of entering into litigation and being in possession or dispossession of movable and immovable property.
The general process for registering limited liability partnership involves the following:
The annual fee is payable to Labuan FSA upon application. Subsequent payment of annual fee is payable on or before each anniversary of the date of its registration.
The insurance sector continued to expand in 2010 with the total number of approved insurance entities increasing to 169 and for the third consecutive year, gross premium generated surpassed USD1 billion.
During the year, 22 new licences were approved, comprising nine insurance brokers, seven underwriting managers, three reinsurers, two captive insurers and one general insurer.
The recent legislative review allows for the establishment of Protected Cell Companies - not only for captive Insurers but for all forms of insurance. In March 2011, the guideline on co-location was extended to allow Labuan insurance and takaful entities to establish marketing offices anywhere in Malaysia. These moves demonstrated the jurisdiction's commitment towards the growth the insurance sector in Labuan IBFC.