Incorporating a Labuan Company: Your Guide to Labuan IBFC

Labuan Company Tax and Incorporation Guide

Labuan, a federal territory of Malaysia is Malaysia’s International Business and Financial Centre (IBFC) established in 1990. Known for its pro-business regulation, attractive tax incentives and strategic location in the Asia Pacific, Labuan has become a hub for international trade and investment. 

 

What Is a Labuan Company?

Labuan Company is a company incorporated or registered under the Labuan Companies Act 1990 (LCA 1990). Residents and non-residents of Malaysia may establish Labuan companies that meet certain conditions, including substance requirements, to enjoy preferential Labuan company tax treatment.

 

Type of Labuan Company Structures 

• Labuan Company 

• Labuan Foreign Company 

• Labuan Protected Cell Company 

 

Why Incorporate a Company in Labuan?

Setting up in Labuan offers several advantages: 

• Access to more than 70 Double Taxation Agreements (DTAs) that Malaysia has signed 
• A competitive Labuan company tax regime: Labuan business activities, as defined in the Labuan Business Activity Tax 1990 (LBATA1990), provide: 

• • Attractive tax regime:  

• • • 3% tax on audited profits for trading activities 
    • 0% for non-trading activities 

• • Flexibility: Option to be taxed under the Malaysian Income Tax Act (24%) to access treaty benefits. 

• • Ease of doing business: Access to banking, trade finance, skilled workforce and multilingual talent. 

• • No Indirect taxes: Labuan has no sales and service tax, import duties or excise duties. 

• • Location: Well-positioned within the Asia Pacific. 

• • No foreign exchange controls: funds can move freely in and out. 

 

Labuan Company Tax Treatment

The Labuan business activity comprises trading and non-trading activities:

Business Activities	Description	Tax Treatment
Trading Activities	Include banking, insurance, trading, management, shipping operations, licensing or any other activity which is not a Labuan non-trading activity	3% of net profits per audited accounts
Non-Trading Activities	Passive income such as holding securities, shares, loans or deposits.	Not subject to tax
Both	Trading and Non-Trading Activities	3% of net profits per audited accounts
Non-Labuan business activities or where an irrevocable election is made to be taxed under the Malaysian Income Tax Act 1967.		Taxed pursuant to the Malaysian Income Tax Act 1967 at the prevailing income tax rate of 24%

 

 Requirements to Incorporate a Labuan company 

1. Share capital 

• In any currency 

• Minimum one share with no minimum share par value 

 

2. Number of directors 

• Must have at least one director who may be a resident director 

 

3. Company secretary 

• Must have at least one secretary which is a Labuan Trust Company 

 

4. Registered office 

• Must have a registered office which is the principal office of a Labuan Trust Company 

 

5. Accounting requirements 

• Labuan companies are required to submit audited accounts as part of tax filing requirements 

 

6. Labuan companies’ economic substance requirements 

Labuan companies must have 

• A prescribed number of minimum employees in Labuan; and 

• A prescribed number of annual operating expenditure in Labuan, based on the specific activity carried on by the Labuan companies 

 

Key Takeaways 

Labuan offers an efficient, business-friendly platform for companies engaged in trading or investment activities across Asia and beyond. With a competitive Labuan company tax framework, simple incorporation requirements and a supportive legal framework, it remains one of Malaysia’s most attractive gateways for international business.