Company management business means the provision of treasury processing services and such other services, and to such persons, as may be permitted by Labuan FSA. The Company management business is governed by the Labuan Financial Services and Securities Act 2010.
PERMISSIBLE ACTIVITIES OF COMPANY MANAGEMENT FIRMS
The Labuan company management firms are permitted to carry out the following activities:-
- Treasury processing activities such as arranging intra-group financing/factoring, managing cash and liquidity positions, providing in-house investment/finance advisory services, processing and confirming deals, preparing accounting records and reports, maintenance of registers and files as well as custodial services.
- Provision of managerial services comprising back and middle office processing functions, act as authorised representatives for support services and intermediation functions.
- Shariah related services which include Islamic advisory services and processing function such as launching, administering and back room processing of collective investment schemes; consultancy, advisory and support services; and developing Islamic trusts. A Shariah Advisory Panel must be engaged to advise on its Islamic operations
APPLICATION FOR LABUAN COMPANY MANAGEMENT LICENSE
Any person intending to undertake company management activities in Labuan may submit an application to Labuan FSA.
Kensington Trust Labuan Limited is a licensed trust company in Labuan and may assist you with license application, establishment and administration of your Labuan Company.
WHO IS ELIGIBLE TO APPLY?
An applicant should meet the following minimum eligibility criteria:
- A trust company licensed under the Labuan Financial Services and Securities Act 2020 (LFSSA) ;
- A firm engaging in company management activities licensed by the regulatory authority in the country of origin, if applicable;
- Ability to demonstrate successful undertakings of similar activities in other financial centres;
- No adverse report from any reliable sources and proven performance record with consistent returns on equity, returns on assets;
- A Labuan company incorporated under the Labuan Companies Act 1990 to be run by personnel with the necessary expertise and skills.
LABUAN COMPANY MANAGEMENT LICENSE FEES
- License processing fee (once-off): USD350
- Annual license fee: USD1,500
The annual license fee is payable when the license is approved by Labuan FSA and remains valid until 31 December of the year of approval. All licensees are required to pay to Labuan FSA subsequently the annual license fees on or before 15 January of each calendar year
LICENSING AND OPERATIONAL REQUIREMENTS
- Must produce a guarantee and non-interest bearing security deposit of RM100,000 equivalents with Labuan FSA to undertake any liability arising from its operations in Labuan;
- Must have a minimum paid up capital of RM100,000 equivalent unimpaired by losses.
- Mut comply with substantial activity requirements in Labuan.
- Must maintain a registered office in Labuan. May apply for Labuan marketing office (LMO) anywhere in Malaysia which must comply with the relevant requirements of the Malaysian authorities.
- Appoint approved auditor in Labuan
- Must notify Labuan FSA of any change to its constituent documents, shareholdings, management or business plan; and
- Must comply with any other requirements issued by Labuan FSA from time to time.
LABUAN IBFC TAXATION SYSTEM
Labuan Business Activity Tax Act 1990 (“LBATA”) governs the imposition, assessment and collection of tax on a Labuan business activity carried on in, from or through Labuan.
Labuan entities that carry on a non-Labuan business activity are subject to the provisions of the Malaysian Income Tax Act, 1967 (ITA).
“Labuan business activity” means:
- a Labuan trading or a Labuan non-trading activity carried on in, from or through Labuan,
- excluding any activity which is an offence under any written law.
Persuant to the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 that took effect on 1st January 2019:
- Labuan trading activity has been restricted to license business activities only.
- Labuan non-trading activity has been restricted to holding company, namely Pure Equity Holding and Non-Pure Equity Holding.
SUBSTANCE REQUIREMENT UNDER LBATA (WITH EFFECT FROM 1ST JANUARY 2019)
Pursuant to section 2B(1) (b) of LBATA, the Labuan entities shall, for the purpose of the Labuan business activity, have :-
- an adequate number of full time employees in Labuan; and
- an adequate amount of annual operating expenditure in Labuan, as prescribed by the Minister by regulations made under this Act.
Section 2B (1A) of LBATA provides that a Labuan entity carrying on a Labuan business activity which fails to comply with the substance requirement for a basis period for a year of assessment shall be charged to tax at the rate of twenty four per cent (24%) upon its chargeable profits for that year of assessment.
To benefit under LBATA, a Labuan company management firm will need to have a minimum of two (2) full time employees in Labuan and minimum annual operating expenditure of RM100,000 in Labuan.
DEALINGS WITH RESIDENT
All Labuan entities are allowed to conduct transactions with Residents of Malaysia in Ringgit Malaysia subject to the filing of a notification to Labuan FSA within 10 days from the transaction effective date. “Resident” here means:
- in relation to a natural person, a citizen or permanent resident of Malaysia; or
- in relation to any other person, a person who has established a place of business, and is operating in Malaysia.
- and includes person who is declared to be a resident pursuant to s.43 of the Malaysian Exchange Control Act 1953.
The amount of deductions allowed in respect of payments made by Residents to Labuan entities are as follows:-
|> Interest expense||75% deductible|
|> Lease rental||75% deductible|
|> General reinsurance premiums||100% deductible|
|> Other type of payments||3% deductible|
ADVANTAGES AND KEY BENEFITS OF LABUAN COMPANY MANAGEMENT BUSINESS
- ZERO withholding tax on payments of dividend and interest to non-residents.
- No import duty / sales tax.
- No foreign exchange controls.
- No capital gain tax / inheritance tax.
- Double Tax Agreements between Malaysia and over 70 countries.