Labuan Taxes Guide

Update Date:2019-5-31 16:44:56 Source:Tannet (Malaysia) Sdn Bhd Views:990

Malaysia Hotline: +603-2141 8908

Building an offshore company can be a complicated process, but if you want to reduce the tax burden, this is also an amazing idea. Many of us don't know that Labuan is a thriving tax haven. Labuan has a simple and attractive low tax system, its unique tax system allows companies to achieve cost reduction, and regional operational flexibility also greatly enhances the convenience of business operations.

Labuan holding companies do not need to pay taxes and do not need to audit, which saves the company a lot of company maintenance fees. For industries in trading and service with foreign business, it is also possible to consider setting up a Labuan trading company to reduce the tax burden and enhance the international image.

1. Taxation system

The Labuan Company established under the Labuan Company Law is subject to the Labuan Business Activity Tax Act (LBATA). According to the Tax Act 1990, Labuan developed a relevant tax system based on the business activities of its company and divided it into two types:

1.1 Non-Trading Activities

Engaged in overseas investment holdings or non-trade commercial activities set up overseas, overseas investment, holding stocks or bonds or real estate are also belong to this non-trading company.

1.2 Trading Activities

Engaged in related commercial activities other than investment holding, such as trading company, consulting firms, insurance and trust company and other related overseas commercial activities. This type of business activity is subject to a tax of 3% of the company's net profit.

1.3 On-Shores Trading Activities

In order to prevent tax avoidance, LBATA also stipulates that Labuan trades with Malaysian or foreign companies. This type of commercial activity is subject to a tax of 3% of the company's net profit.

Labuan Companies


Tax Rates


Holding company, investment company, bonds, stocks, foundations

No audit required, 0% tax rate


Trading company, consultancy services, banking, insurance, management, licenses, ship operations

3% of net profit

On-Shores Trading

Trading with Malaysia or foreign companies

3% of net profit

2. In addition, there are some benefits you don't want to miss:

2.1 100% ownership of company – foreigners can fully own Malaysian companies;

2.2 No stamp duty, value added tax, consumption tax, service tax, withholding tax;

2.3 Without foreign exchange control regulations, ease of fund flow;

2.4 Double Taxation Agreement (DTA) - you can avoid double taxation;

2.5 Most businesses do not require a trading license;

2.6 Flexible to operate in Malaysia or foreign currency bank accounts;

2.7 All directors are not subject to personal income tax.

The Labuan International Business Finance Centre in Malaysia has a simple and attractive tax system. Its flexibility and low taxation have attracted a lot of foreign investment in Labuan. For investors who want to enter the Malaysia market, Labuan is definitely your best option.

If you want to invest in or register a company, Tannet can handle and help you, because Tannet is familiar with Labuan company registration and can provide you with a practical solution. For more information, please feel free to call the Tannet service hotline: 603-2141 8908 or email, Malaysia company address: Unit 6.06, Level 6, Amoda 22, Jalan Imbi 55100 Kuala Lumpur.

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