A Labuan company may be set up as a company limited by guarantee under the Labuan Companies Act 1990 (“LCA”).
Company limited by guarantee means a company formed on the principle of having the liability of its members limited by its memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of it being wound up.
PURPOSES OF COMPANIES LIMITED BY GUARANTEE (“CLBG”)
- Trade associations
- Charitable bodies
- Professional and learned societies
- Community projects
- Religious bodies
- Incorporated clubs and other non-profit groups that require corporate status
Most guarantee companies are set up for non-profit making purposes. It may be used for commercial undertakings or trading but of very rare occurrence.
KEY FEATURES / REQUIREMENTS OF CLBG
- Separate legal entity
- No share capital
- Limited liability
- Memorandum & Articles (M&A)
- Members - no shareholders, but the company must have minimum one (1) member, either corporate or individual
- Directors - at least one (1) director
- Company Secretary in Labuan
- Registered Office in Labuan and it is the principal office of a trust company in Labuan
- No participation in profits for a non-profit company
- Annual General Meeting
- Maintain proper accounting records and prepare accounts of the Company
- Audit is optional. However, you may wish to consider audit for transparency reason especially for non-profit organisation
- 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 of Board Malaysia
The LCA requires the engagement of services of a Labuan IBFC registered trust company to act as its incorporation agent.
Kensington Trust Labuan Limited is a licensed trust company in Labuan and may assist you with the registration and administration of your company.
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 in, from or through Labuan.
- “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.
- “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 3% of net profits as per audited accounts.
- “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 companies 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.
- Labuan entities that carry on a non-Labuan business activity are subject to the provisions of the Malaysian Income Tax Act, 1967 (ITA).
DEALINGS WITH RESIDENT
All Labuan entities are allowed to conduct transactions with residents of Malaysia in Ringgit Malaysia. “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||67% deductible|
|> Lease rental||67% deductible|
|> General reinsurance premiums||100% deductible|
|> Other type of payments||3% deductible|