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Taxation in Labuan

Update Date:2018-12-27 11:42:58 Source:Tannet (Malaysia) Sdn Bhd Views:232

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Labuan is located in eastern Malaysia and also one of the Federal Territories of Malaysia. Located in the heart of the Asia Pacific region, Labuan is strategically positioned to reach one of the fastest growing regions in the world, creating an excellent opportunity for companies to connect with Asia and other economies. Malaysia's Labuan International Business and Finance Center has a good partnership with countries around the world. As ASEAN will formally form the ASEAN Economic Community (AEC), it will become the seventh largest economy in the world. Then, the “One Belt, One Road” strategy advocated by China has further accelerated economic growth in Asia and brought tremendous opportunities for cooperation among countries in the region.



Labuan Corporate Tax Overview

1. Double Taxation Agreement (DTA)

Generally, zero-tax overseas registered countries such as BVI or Cayman have no way to sign a double taxation agreement with any country, commonly known as the DTA (Double Taxing Agreement). The advantages like Labuan are rare in the world. Labuan's 3% net profit and RM20,000 fixed tax amount indirectly maintain its flexible strategy in the double tax agreement. Moreover, the holding company does not need to pay taxes in Labuan, and Greater increase in the attractiveness of Labuan. To further protect entrepreneurs, Labuan did not claim to be Tax Haven, but the Strategic Tax Planning Centre.


2. Excellent Tax Benefits

  • Labuan non-trading company: This type of business activity is tax exempt under the tax regulations of Labuan;
  • Labuan trading company: business activities other than holding investment, such as: trade, consulting management, insurance trust, etc., can choose to pay 3% corporate profits tax, but must submit annual audit report; or pay annual tax of RM 20,000, but exempted from submitting annual audit report;
  • For companies who have business with Malaysian companies, a 25% corporate tax must be paid (not recommended);
  • No stamp duty, value added tax, consumption tax, service tax, withholding tax;
  • Without foreign exchange controls, company funds can be flow freely.


All Labuan's financial year ends on December 31 of each year. Companies that choose to pay a 3% corporate profits tax must prepare financial statements and audit reports to the Malaysian Taxation Office. Companies that choose to pay an annual tax of RM 20,000 do not need to prepare audit report. Labuan companies must maintain financial statements, complete audit reports, submit annual returns, tax returns, E forms and forms BE (if applicable) in accordance with the requirements of the Labuan Administration to complete the annual compliance process.



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