One-Stop Solution to register company in Labuan
To register company in Labuan is hassle-free with Tetra Consultants’ assistance. Our business expansion service package includes company registration with Labuan International Business and Financial Centre (IBFC), sourcing for local office and employees, corporate bank account opening and license applications.
Labuan, officially the Federal Territory of Labuan, is a Federal Territory of Malaysia. After the implementation of the Offshore Companies Act 1990 whereby set up business in Malaysia by foreigners was encouraged, Labuan has continuously captured the attention of numerous foreign investors due to its business-friendly environment, anchored by a simple and lucrative tax system. The jurisdiction is well-supported by a robust, modern, and internationally-recognised legal framework enforced by its regulator, Labuan Financial Services Authority (Labuan FSA).
Many foreign investors choose to set up their offshore vehicles and financial companies in Labuan as Labuan IBFC boasts a wide range of business and investment structures facilitating cross-border transactions, business dealings and wealth management needs. Setting up a company in Malaysia in the strategic location of the middle of the Asia Pacific region provides investors the perfect opportunity to penetrate the booming Asia markets.
Our service package includes everything you will require for registration of foreign company in Malaysia, specifically Labuan. According to the new economic substance requirements in Labuan, companies carrying out “Labuan business activity” are required to hire local employees, have a local physical office and meet minimum domestic operating expenditure. Tetra Consultants will assist our international clients to meet these new requirements for company formation and stay compliant to the new Labuan economic substance requirements.
- Company registration with Labuan IBFC
- Local company secretary and registered address
- Opening local or international corporate bank account
- Financial license application (if required)
- Recruitment of local employees and sourcing of local office (if required)
- Annual accounting and tax services
When can I expect to start business?
- Tetra Consultants will complete the process to register company in Labuan through a seamless and fuss-free procedure. Upon receiving the required due diligence documents of the directors and shareholders, Tetra Consultants will proceed ahead with the search for the availability of your preferred business trade name.
- The process can be carried out remotely and you will not be required to travel to Labuan during the process.
- Within 2 weeks, you can expect to receive the documents of your new company including certificate of formation, memorandum & articles of association as well as a register of directors and shareholders.
- Depending on whether your business nature falls under “Labuan business activity”, you may be subject to additional requirements. When necessary, Tetra Consultants will assist you to recruit local employees and rent a local office to meet these Labuan economic substance Thereafter, you will pay the salaries and rentals directly to your employees and landlord.
- Within 4 weeks upon company registration, Tetra Consultants will open a corporate account with a Labuan bank or overseas bank. Depending on the business activity, some Labuan banks may require our international clients to travel to Labuan for a face-to-face interview. Tetra Consultants will request for alternative identification methods such as video conference call or phone call.
- If Labuan banks insist on our clients traveling, Tetra Consultants will send a representative to attend the bank meeting as well so as to successfully complete the offshore bank account opening process.
- Consequently, you can expect to start operations and issue invoices with your Labuan Company within 6 weeks upon engaging Tetra Consultants. If 6 weeks is too long, investors can take the faster but more expensive option of Labuan international company registration, which is to buy a ready-made company with bank account in Malaysia
New Labuan Business Activity Tax
- These changes are in line with Malaysia’s commitments as a member of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to address tax evasion and harmful tax practices, including the elevation of substantial activities requirements in Labuan.
- The new Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 was introduced on 1stJan 2019. These changes are made as Malaysia continues to commit as a member of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS). With this change, Malaysia looks to clamp down on tax evasion, harmful tax practices and improve tax transparency.
- Before proceeding with Labuan offshore company registration, it is important to know the requirements and regulatory obligations of your company. Tetra Consultants team of experts will advise our international clients on the additional economic substance requirements and provide solutions if required. See this webpage to find out how these changes affect Labuan licensed entities.
Labuan International Business Company
Labuan’s International Business Company (IBC) is often the ideal choice amongst foreign investors setting up a business entity in Labuan due to a beneficial tax structure and full-foreign ownership. Furthermore, the availability of a wide variety of business licenses makes it a lucrative choice. An International Business Company is regarded as a limited liability entity where business owners are not personally liable or responsible for the company’s debts and liabilities.
Key requirements and features
- Minimum 1 Shareholder of any nationality required with full foreign ownership of the company’s share capital granted.
- Minimum 1 Director of any nationality.
- There is no minimum paid-up capital required.
- Local registered address in Labuan.
- 1 resident Corporate Secretary.
- Relatively low Corporate Tax Rate of 3%. Labuan’s Tax Rate is comparatively lower than the Worldwide Average Statutory Corporate Income Tax Rate of approximately 24%, measured across 176 jurisdictions.
Types of International Business Companies
- International Business Companies (IBCs) are classified into one of the two types listed below based on the nature of activities they undertake.
- Both types of entity are now allowed to conduct business with Malaysian companies and residents, although this does require prior notification of the Labuan FSA. Such transactions are also subject to the standard taxation of a Malaysian firm, at a rate of 17% below RM500,000 (US$120,000) and 24% for anything above that ceiling.
- The differences between these two types of firms lie in the tax rate they are subjected to and economic substance requirements. If they fail to satisfy these requirements, they will be taxed under the Labuan Business Activity Tax Act 1990 instead, at the standard rate of 24%.
Labuan trading company
- A firm will be classified as a trading company when it engages in trading activities, which are defined as banking, insurance, management, shipping or trading. Firms should note that carrying out a mixture of both trading and non-trading activities will lead to them being classified as a trading company, which is subject to stricter requirements.
- One popular use of such a firm is as an offshore company for forex trading. Before conducing such activities, firms must possess the Labuan Money Broking License issued by the Labuan FSA. The requirements for obtaining this are stricter than the Labuan IBC, and have been listed below:
- 1 shareholder
- 2 directors (with 3 years of minimum experience, and at least a diploma level educational qualification)
- Minimum capital of RM500,000 (US$120,000)
- These Money Broking firms are subject to the same tax rate of 3% that all trading companies are subject to, as well as the need to have a local office with at least 2 employees. However, their minimum yearly domestic expenditure has to be RM100,000 (US$24,000) instead of RM50,000 (US$12,000) for the standard trading company.
Labuan non-trading company
- A firm that does not engage in any of the above activities, and instead holds investments in deposits, stocks, securities or real estate is known a Labuan investment holding company, since these are considered as non-trade activities.
- Such firms are tax exempt, but must incur a minimum of RM20,000 (US$5,000) in yearly domestic expenditure in order to maintain their tax exempt status. A holding company that generates profit from different asset sources also has the additional requirement of needing to hire 1 employee.
How to register company in Labuan?
In order to successfully incorporate your Labuan business, Tetra Consultants advises you to follow the following steps:
Step 1: Choose a suitable business structure
- Tetra Consultants’ team of experts will first fully understand your unique business model, needs, and goals, before recommending the most optimal business structure for you. Labuan IBC tends to be most ideal and popular with our foreign clients since it offers full foreign ownership and tax benefits.
- Tetra Consultants will also advise on the optimum paid-up share capital, regulatory requirements and whether there is a need for licenses for the intended business activity. Some popular licenses available in Labuan include Fund Management License and Money Broking License.
- If your company is subject to additional economic substance requirements, Tetra Consultants will assist you to recruit local employees and rent a local office space.
- The company’s application must be sent through a licensed Labuan trust company. This company will also conduct the first layer of due diligence checks. Tetra Consultants is experienced in operating in the Labuan region, and will ensure you have a smooth and hassle-free experience.
Step 2: Reservation of company name
- Once the checks have been passed, we will proceed to reserve a name for your company with the Labuan FSA. The name should not be offensive or similar to an existing name. Tetra Consultants will do a name check for you as to ensure minimal delays in the process. The application fee will be RM50 (US$12), and approval is expected to take 24 hours. Thereafter, the name will be reserved for 3 months.
Step 3: Preparation of supporting documents
- Before Tetra Consultants can set up your company in UK, you are required to provide a list of required KYC documents. Some of these documents include the names of directors and identification proof.
- Upon receiving all the necessary documents, Tetra Consultants will proceed to draft and notarize the company’s Memorandum and Articles of Association.
- According to the business activity and company structure, Tetra Consultants will also draft articles of incorporation, business plan and other incorporation documents.
Step 4: Filing for registration
- Thereafter, firms may proceed with incorporation. Firms will need to submit their completed memorandum and articles of association along the Labuan company registration fees of RM6,000 (US$2,000). The Directors’ Declaration and Consent Letters signifying their willingness to take up appointment will also be needed.
- If all documents and payments are in order, the process can be completed in as quickly as 24 hours.
Step 5: Visa application
- Tetra Consultants is also committed to helping your business stay compliant after the incorporation process and will help you to do the necessary so that your business may operate legally.
- We will help you to apply for the Labuan Company Work Permit which will allow you and your family to enter Malaysia, and more importantly for you to be able to perform business activities legally since foreigners with a tourist visa are not allowed to do so.
- The Labuan Visa requirements are easy to fulfil as it only requires a passport and a business plan. The minimum paid-up capital is also very cheap at US$1. First-time visitors are also required to stamp their passports with the immigration department in Labuan to endorse their visa.
Step 6: Corporate bank account opening
- After registration, Tetra Consultants will assist you in opening a corporate bank account. Our team has established partnerships with multiple reputable banks in both Malaysia and globally. We will present your business to each relationship manager and compliance team.
- Typically, the account opening will take roughly 4 weeks. In most cases, the directors and shareholders are not required to travel. However, if travel is required, we will have a representative accompany you to the bank meeting. Alternatively, our team will negotiate with the banks to conduct a conference call instead or to request a waiver.
- Once your account has been successfully opened, Tetra Consultants will courier the internet banking token and access codes to your preferred address.
Step 7: Financial reporting and taxation obligations
- Tetra Consultants will timely prepare your firm’s financial statements, annual returns and accounting records and file them with the relevant authorities and auditors to ensure your company remains compliant to the Labuan tax authority, and consequently enjoy the special Labuan offshore tax rate of 3%. Annual filings and tax returns will be timely completed before the stipulated deadlines set out by the government.
Why do companies incorporate in Labuan?
The Malaysian government highly values foreign direct investments and has provided foreign investors with a business-friendly environment in Labuan. The nation lays out numerous attractive benefits of doing business in Labuan to facilitate and ease the integration of international business owners into the country’s economy. Tetra Consultants will address any queries you have at any point in time during the process to register company in Labuan. Additionally, we adopt a PESTLE framework to help you comprehensively analyse the feasibility and practicality of setting up a business in the Labuan.
- According to the Corruption Perceptions Index (CPI) published by the Transparency International Organisation, Malaysia ranked 57thout of the 198 countries evaluated. The CPI is the leading global indicator of public sector corruption. Malaysia’s favourable ranking implies a lower risk of corruptive activities in the nation’s public sector which boosts an investor’s confidence in the political stability of the country.
- Malaysia maintains a stable and healthy political relationship with its neighbouring countries. With the help of the nation’s ASEAN membership, it has opened up a wide array of regional business opportunities for Labuan due to high market exposure across multiple countries in the region. As such, Labuan has become one of the most popular jurisdictions for foreign investments. The government’s positive political ties with neighbouring countries provide business confidence and assurance to foreign investors.
- Malaysia establishes global diplomacy relationships with several nations and is a member of the United Nations and World Trade Organisation (WTO). Furthermore, the nation’s healthy diplomatic relations led to Free Trade Agreements, facilitating Labuan’s business access to international markets and hence opening up numerous business opportunities.
- Companies in Labuan are subjected to significantly lower corporate tax rates in comparison to the global average. The corporate tax rate applicable to Labuan companies is 3% on chargeable annual audited net income derived from Labuan trading activities.
- Additionally, companies involved in non-trading business activities are not subjected to any corporate tax, which is exponentially lower in comparison to the Worldwide Average Statutory Corporate Income Tax Rate of approximately 24%, measured across 176 jurisdictions.
- With reference to the Global Competitiveness Report published by the World Economic Forum, Malaysia ranked 27th out of 141 countries listed. Malaysia’s satisfactory performance on the Global Competitiveness Index illustrates the country’s adequate productivity in utilising its available resources to ensure sustainable economic prosperity.
- In accordance with the International Monetary Fund (IMF) 2021 estimates, Malaysia ranked 37th out of 186 countries in terms of nominal Gross Domestic Product (GDP). Malaysia’s favourable ranking creates positive sentiments about the nation’s economy.
- According to the EF English Proficiency Index, Malaysia has a high proficiency in English. Malaysia ranked 30thout of the 100 countries listed under the EF English Proficiency Index. Furthermore, Malaysia is 3rd in terms of English proficiency in Asia. Despite the nation’s remarkable performance on the EP English Proficiency Index, Malay is one of the official languages in Malaysia. If required, Tetra Consultants will arrange for a translation service conducted by a certified translator.
- Malaysia has a population size of approximately 31.95 million, with an average labour participation rate of 69% according to the World Bank. As such, foreign investors will gain access to a sizeable and inexpensive labour force.
- In accordance with The World Bank, Malaysia has an extensive and vast population size of approximately 31.95 million. The immense nature of the nation’s overall population grants business owners with access to a robust domestic market.
- In accordance with the United Nations Conference on Trade and Development (UNCTAD), Malaysia ranked 5th amongst the top 10 developing countries in Asia in terms of digital readiness. Furthermore, Malaysia has seen an improvement in its global ranking from 39th place to 34th.
- In hopes to digitalise the nation’s economy, the government has provided a wide array of government funding schemes for Small Medium Enterprises (SMEs) and Start-ups in Malaysia. The Malaysian Technology Development Corporation (MTDC) has been the primary player in technology commercialization in Malaysia, promoting the adoption of technologies by local corporate entities.
- There are several established start-up incubators in Malaysia. As such, foreign investors will be provided with business opportunities to integrate seamlessly and grow nationally in the Tech business sector. An example would be 1337 Ventures, a technology incubator to provide a conducive business environment, facilitating growth and innovation for tech firms in Malaysia.
- According to the latest annual ratings issued by the World Bank, Malaysia is ranked 12thworldwide in terms of the jurisdiction’s ease of doing business. The nation’s exemplary ease of doing business ranking exhibits Malaysia’s highly conducive regulatory environment for business activities.
- Malaysia’s Free Trade Agreements grants corporate entities in Labuan access to foreign markets, facilitating the increase in trade volume with partner countries. The expansion of Labuan trade volume creates business opportunities for foreign investors.
- Labuan IBFC is bound by an effective regulatory regime that subscribes to internationally-recognized standards and best practices in financial services and prudential regulation.
- Labuan has a wide variety of licenses for different financial businesses. Some of these licenses include money broking license, insurance license, commodity trading license and baking license.
- Malaysia ranked 75thout of the 180 countries assessed on the Environmental Performance Index (EPI). The nation’s less than favourable ranking highlights Malaysia’s adequate proficiency in addressing the environmental challenges that it faces. There is sufficient understanding of the detriments of environmental progress in Malaysia
- Just recently, Malaysia’s Department of Environment released a National Policy on the policy seeks to work towards continuous economic, social and cultural progress and enhancement of the quality of life of Malaysians through environmentally sound and sustainable development.
Contact us to find out more about how to set up business in Labuan. Our team of experts will revert within the next 24 hours.
How much does it cost to set up an offshore business in Labuan?
- The engagement fee depends on the services you require from Tetra Consultants. Prior to each engagement, our team will fully understand your business needs and inform you of the exact services you require.
- For example, you may not require nominee director services if you have a local business partner or family member. Alternatively, you may not require our bank account opening services if you already have one with some banks.
- Tetra Consultants’ fees include government fees such as business name reservation charges, company registration fees and tax registration costs.
What is a Labuan company?
- A Labuan company is a company specifically incorporated in accordance with the Labuan International Business and Financial Centre’s guidelines and the Offshore Companies Act of 1990.
Can a Labuan offshore business do Malaysia business?
- Recent changes to legislation have made this possible, however it will not be a tax-exempt activity.
What is Labuan non-trading activity?
- Non-trading activity includes investment holding activities, with income being sourced through dividends or interest payments instead.
Is Labuan tax free?
- Labuan is only tax free for non-trading companies that meet the minimum economic substance requirements of having a yearly domestic expenditure above RM20,000 (US$5,000). Non-trading companies which generate profit from multiple income sources might have the additional requirement of hiring one full time employee as well.
Is Labuan a tax haven?
- Even though Labuan has very attractive tax exemption policies, it is not a tax haven since it still has strictly enforced tax reporting and filing standards.
Is Labuan a city?
- Labuan is a federal territory composed of 7 islands. A federal territory lies in between a country and state in terms of jurisdiction.
What is offshore company in Malaysia?
- An offshore company in Malaysia refers to a company that is incorporated in Malaysia but does little to no domestic business. It is instead used for business activities out of Malaysia.
Why has the Malaysian government positioned Labuan as an offshore international centre?
- Labuan was part of the government’s efforts to reduce Malaysia’s dependence on commodities exporting and increase the contribution of the service sector to the nation’s GDP.
Why do business in Malaysia?
- Malaysia is ranked 12th worldwide in the World Bank’s ease of doing business index. It also allows for full foreign ownership. These factors make it easy for foreigners to start and do business in Malaysia.
What is the corporate tax rate in Labuan?
- Corporate tax rate is 3% for trading companies and 0% for non-trading companies. However, if these companies do not meet the minimum economic substance requirements, they will be taxed at the standard rate of 24%.
What is the minimum capital requirement in Labuan?
- The minimum capital is generally US$1, though it might be higher for certain licensed entities such as forex brokers, who are subject to a minimum capital of US$120,000 instead.
What is the annual filing requirement for a Labuan company?
- Labuan companies will only need to file their records if they engage in business with Malaysian resident or firms, or if they are trading firms.