Since Labuan IBFC offers a wide variety of commercial and investment structures that facilitate cross-border transactions, business interactions, and wealth management requirements, many foreign investors decide to establish their offshore vehicles and financial organizations in Labuan.
The ideal option for investors to break into the growing Asian markets is to establish a business in Malaysia, which is strategically located in the midst of the Asia Pacific area. Officially known as the Federal Territory of Labuan, Labuan is a Malaysian Federal Territory.
Due to its business-friendly environment and straightforward and advantageous tax structure, Labuan has consistently drawn the interest of several foreign investors since the enactment of the Offshore Companies Act 1990, which encouraged foreigners to establish businesses in Malaysia.
The Labuan Financial Services Authority (Labuan FSA), the jurisdiction’s regulator, upholds a strong, current, and internationally recognized legal framework.
Refer to guide on Labuan company formation to know more about the requirements and process of registering a company in Labuan.
How to Set Up Malaysia Labuan Offshore Company
Selecting a business structure
Choose a business structure, either a Labuan International Company (LIC) or a Labuan International Limited Partnership (LILP). Private limited corporations, which are more popular in other jurisdictions, are rarely used by foreign investors in favor of LICs.
Business name reservation
Choose an appropriate name for your company and apply it for approval to the Labuan Financial Services Authority (Labuan FSA). The name must follow Labuan’s standard conventions and cannot have a similar sound to any existing company names. Acceptance of the application is expected to take 24 hours and cost RM50 ($12).
Preparing the supporting documents
- Each stakeholder’s and account signatories’ NRIC or passport copies
- Each shareholder interested in the company must provide evidence of their residential address (original utility bills or personal bank statements are preferred).
- Proposed Labuan Company detailed business plan
- Articles of Association and Memorandum of Association of the company
- The trust company’s statutory declaration of compliance
- Approval to serve as a director
- Licenses required for conducting business, if any, must be secured and approved prior to the incorporation of the company.
Applying for registration
Companies must submit their completed memorandum and articles of organization along with the RM6,000 (US$2,000) required for Labuan business registration. Additionally required are the Directors’ Declaration and Consent Letters indicating their readiness to accept the appointment.
The process can be finished in as little as 24 hours if the necessary paperwork and fees are submitted on time.
Applying for visa
If the applicant or their key staff intend to reside in Malaysia, they might need to apply for the necessary visas. Relin Consultants will help you decide, with the assistance of Malaysian immigration officers, the best visa options based on your line of work.
Opening a corporate bank account
In Labuan, you can open a corporate bank account once your business has been approved. Choose a reputable bank with experience doing business with offshore Labuan companies. You must adhere to the bank’s requirements and provide the required business records. An account can usually be opened in 4 weeks. Usually, the shareholders and directors do not need to travel.
● Annual Reporting & Compliance for Labuan Offshore Company
➢ Financial statement
All Labuan offshore companies that engage in trading must annually examine their financial statements. For the assigned auditor to finish the audit process by May each year, all accounts must be completed and authorized by the Board of Directors no later than the month of March.
➢ Income tax return
The audited financial statement is needed to file taxes with the Labuan Inland Revenue Board. On international sales, the company tax rate is 3%. However, under the Income Tax Act of 1967, local transactions will be subject to a 24% tax on net profits paid to the local Inland Revenue Board.
If a company conducts business both domestically and abroad, the auditor must separately identify both markets as “Labuan Business” and “Non-Labuan Business” operations in the audit report. The company tax file must be submitted yearly by May 31.