Factoring Business in Labuan IBFC

Factoring business means the business of acquiring debts due to any person as defined under the Labuan Financial Services and Securities Act 2010.

APPLICATION FOR LABUAN FACTORING LICENSE

Any person intending to undertake factoring activities may submit an application to Labuan FSA. Kensington Trust Labuan Limited is a licensed trust company in Labuan and is able to assist you with license application, establishment and administration of your Labuan company.

LABUAN IBFC TAX SYSTEM

Factoring activities are considered as Labuan trading activity. The Labuan entity shall pay either 3% of net profits as per audited accounts OR RM20,000/- upon election annually.

SOME OPERATIONAL REQUIREMENTS

  • Option to either set up an office in Labuan or operate through its registered office. However all transactions must be done through Labuan and adequate and proper records and books of accounts must be maintained in Labuan.
  • Must transact business only in foreign currency and not deal in Malaysian Ringgit except for the purpose of defraying administrative and statutory expenses.
  • Prohibited from dealing with Malaysian residents other than those approved by the Bank Negara Malaysia.

ADVANTAGES & KEY BENEFITS OF LABUAN FACTORING

  • ZERO withholding tax on payments of dividend and interest to non-residents.
  • No stamp duty on all instruments relating to offshore business activities including share transfer.
  • No import duty / sales tax.
  • No foreign exchange controls.
  • No capital gain tax / inheritance tax.
  • Double Tax Agreements between Malaysia and over 70 countries.
  • 50% tax abatement for expatriate professionals and managers employed under Labuan companies.
  • 100% exemption for director’s fees received by non-citizen directors of Labuan companies.

LABUAN FSA LICENSE FEES

License processing fee (once-off)
RM1,000

Annual license fees

  • RM40,000 for those with physical presence; OR
  • RM60,000 for those without physical presence

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. Subsequent annual license fee is payable on or before 15 January of each calendar year