A foreign company shall not have a place of business in Labuan or carry on business in Labuan unless it is registered as a foreign Labuan company (“Labuan Branch”) under the Labuan Companies Act 1990 (“LCA”). This write-up does not apply to a foreign company registered under the Malaysian Companies Act 2016. The LCA requires the engagement of services of a Labuan IBFC registered trust company to act as its registration agent.
Kensington Trust Labuan Limited ("KTLL") is a licensed trust company in Labuan and may assist you with the registration and administration of your Labuan Branch.
NAME OF LABUAN BRANCH
The Labuan Branch shall have the same name as its foreign company and advisable to have the additional words “Labuan Branch” behind its name. Eg. XYZ Limited, Labuan Branch.
REGISTERED OFFICE OF LABUAN BRANCH
It is mandatory for the Labuan Branch to have a registered office in Labuan, which office shall be the principal office of a Labuan trust company.
The registered office of KTLL will be the registered office of the Labuan Branch.
The Labuan Branch does not have its own share capital. A prescribed fee is payable to the Labuan Financial Services Authority (“Labuan FSA”) upon registration of the Labuan Branch based on share capital of its foreign company.
CERTIFICATE OF REGISTRATION
Upon lodgement of complete documentation and payment of fees as well as clearance from the due-diligence process conducted by the Labuan FSA, a certificate of registration of a foreign Labuan company will be issued. The certificate shall be conclusive evidence that the requirements as to registration have been complied with.
- Annual Return: Lodge annual return once in each calendar year not later than thirty (30) days prior to the anniversary of the date of its registration.
- Annual Government Fee: Pay annual fee of such amount as may be prescribed not later than thirty (30) days from each anniversary of the date of its registration.
- Annual Tax Filing: Annual tax return needs to be filed with the Malaysian Director General of Inland Revenue by 31 March of that year of assessment. Normally, an extension of time for filing is allowed by the Inland Revenue Board of Malaysia.
LABUAN IBFC TAX SYSTEM
Labuan Business Activity Tax Act 1990 (“LBATA”) governs the imposition, assessment and collection of tax on a Labuan business activity carried on by a Labuan entity in, from or through Labuan. Only Labuan entities carrying on a Labuan business activity are chargeable to tax under the LBATA.
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 out by a Labuan entity (which includes Labuan Branch);
- activities carried on in, from or through Labuan;
- business currency other than Malaysian currency;
- activities carried out with non-resident or with another Labuan entity
“Labuan non-trading activity” means an 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. Such activity is not subject to tax under LBATA.
“Labuan trading activity” includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity. The Labuan entity shall pay either 3% of net profits as per audited accounts OR RM20,000/- upon election annually.
Labuan entity carrying on both Labuan trading and non-trading activities will be deemed to be carrying on Labuan trading activities. Hence, it will have the same tax treatment as those undertaking Labuan trading activity mentioned above.