One-Stop Solution to Incorporate a Company in Labuan Malaysia

With KGM Advisory‘s guidance, registering a company in Labuan is effortless. Our business formation service package comprises company registration with the Labuan International Business and Financial Centre (IBFC), renting local shared office space, the opening of a corporate bank account, and assistance in the work permit application for the Directors and license applications. Labuan IBFC offers a variety of commercial and investment structures that facilitate cross-border transactions, business interactions, and wealth management requirements, luring many foreign investors to establish their offshore businesses in Labuan. The strategic location of Malaysia in the center of the Asia-Pacific region provides investors with the ideal opportunity to penetrate the developing Asian markets.

Labuan, officially known as the Federal Territory of Labuan (East Malaysia), is a Malaysian Federal Territory. Since the 1990 implementation of the Offshore Companies Act, which allowed foreigners to establish businesses in Malaysia, Labuan has attracted an increasing number of international investors due to its business-friendly climate, which is supported by a straightforward and lucrative tax structure. The jurisdiction is underpinned by a solid, contemporary, and internationally-recognized legal framework that is enforced by the Labuan Financial Services Authority, its regulatory body (Labuan FSA).

According to the new economic substance criteria in Labuan, companies doing “Labuan business activity” are expected to hire local workers, have a physical office in Labuan, and spend a minimum amount on domestic operations.

KGM Advisory Consultants will assist our foreign clients in meeting these new company formation standards listed and adhering to the new Labuan economic substance requirements.

• Company Incorporation with Labuan IBFC
• Appointing a company secretary
• Renting a physical office address (separate from the registered office address)
• Opening a corporate bank account
• Applying for a related business license to commence the physical business (if required)
• Hire Malaysian staff and register the company with related regulatory bodies (KWSP, LHDN, SOCSO)
• Prepare mandatory annual accounting, audit, and tax reports (Applicable for the dormant company as well)
• Apply for a work permit for the foreign directors (if necessary)

Application Process for Setting Up a Labuan Company

1. Submit Your Interest (connect with our contact us page)
2. Our Offshore Incorporation expert will reach out to you for an in-depth discussion
3. A company set up process with details and a fee list will be sent to you upon request

After confirming the service, we will need the following documents to incorporate the company-

• Passport copy for all Shareholders & Directors (to be certified true copy by a Lawyer, Charted Accountant/ Notary Public/ Commissioner for Oaths/ Member of a professional body).
• Proof of address for all shareholders & directors e.g. Utility Bill, Bank Statement (to be certified true copy by a Lawyer, Charted Accountant/ Notary Public/ Commissioner for Oaths/ Member of a professional body).
• CV or Resume (Signed by applicants) for all shareholders & directors.
• References letter (for all shareholders & directors) from bankers or members of the professional body i.e., Lawyers, Independent Auditors/ Chartered Accountants/ Licensed secretaries/Bankers with their respective contact details (name, position, contact number, and email address).
• Completed Company Incorporation Questionnaire (CIQ) (will be provided by KGM Advisory upon service confirmation).
• Driving License for all shareholders & directors
• Bank statement for all shareholders & directors
• Business Plan

Email us the completed CIQ together attached with the other documents mentioned above. The incorporation process will commence upon receiving payment.

Labuan Incorporation’s key points

Item(s)		Description
Location		The Federal Territory of Labuan is located off the northwest coast of Borneo, north of Brunei Bay, and faces the South China Sea. Labuan is an island with a population of approximately 100,000 people. It is a relatively small village where everyone knows one another. Labuan Town (Bandar Labuan in Malay) is the principal city, originally known as Victoria during the colonial period. Labuan Town is one of the cleanest municipalities in Malaysia.
Type of Company		Labuan Company in most cases companies limited by shares.
Timeline to Incorporate		A minimum of 14 working days if there is no further query from Labuan Financial Services Authority (LFSA)
Taxation		With the OECD initiative to curb harmful tax practices, you need to comply with the economic substance requirement in order for you to enjoy the Labuan tax. Pursuant to section 2B (1) (b) of LBATA, the Labuan entities shall, for the purpose of the Labuan business activity, have: – i) an adequate number of full-time employees in Labuan; and ii) an adequate amount of annual operating expenditure in Labuan, as prescribed by the Minister by regulations made under this Act.   Section 2B (1A) of LBATA further provides that a Labuan entity carrying on a Labuan business activity that fails to comply with the substance required for a basis period for a year of assessment shall be charged tax at the rate of twenty-four percent (24%) upon its chargeable profits for that year of assessment.   As the business activities of this type of entity are generally involved in either Pure Equity Holding or Non-Pure Equity Holding or Other Trading Activities or License Entity, the Substance Requirements are as follows:   Pure Equity Holding       To comply with management and control requirements in Labuan, the entity is to hold at least a minimum of one board meeting in Labuan for each calendar year and incur a minimum annual operating expenditure of RM20,000 per annum in Labuan.   Non-Pure Equity Holding   To comply with a minimum of one (1) full-time employee in Labuan and a minimum annual operating expenditure of RM20,000 per annum in Labuan.   Other Trading Activities   To comply with a minimum of two (2) full-time employees in Labuan and a minimum annual operating expenditure of RM50,000 per annum in Labuan.     License Entity To comply in accordance with PU(A) 392.
Disclosure of beneficial owner		Labuan implements anti-money laundering/counter-terrorism financing legislation requiring all licensed service providers to verify the customer’s identification prior to conducting business. Under the law, failing to do so constitutes an offense. Therefore, trust firms, banks, insurers, etc. will be informed of beneficial ownership, but not the Authority.
Minimum Paid up capital		USD 1
Permitted Currency		USD
Number of minimum shareholders		One shareholder and the shareholder don’t require to reside in Malaysia.
Local Director		Not mandatory
Company Secretary		Every company must need one residence licensed corporate secretary
The requirement to file an annual return		Yes, it’s mandatory

Purpose and Benefits of Setting Up a Labuan Entity

Today’s corporations increasingly operate on a global scale through international subsidiaries. Corporations can improve their public profile and engage in international trade by forming an offshore company. Some typical applications and uses of offshore businesses are outlined below.

• Using offshore companies to conduct international business
• Ability to open offshore bank accounts to receive offshore transactions, which can minimize the tax.
• Apply for a work permit immediately after registering the company.
• Can set up an investment holding company to open up the opportunity for investment financing.
• A straightforward and advantageous tax system
• Geographically located in the Asia Pacific region and sharing a common time zone with many large Asian cities.
• 100% tax exemption for director’s fees received by non-citizen directors of Labuan company.
• Information in regard to your identification, account information, and transactions are rigorously guarded in offshore jurisdictions such as Labuan, which demand confidentiality. However, investigations into criminal acts such as money laundering, drug trafficking, terrorism, and other illegal activity are an exception to this rule.
• No import duty/ sales tax

Labuan Work Permit Application

The workforce is the very heart of your business. But before your team may begin working, a legal application process must be completed. However, it can be difficult if you have never done it before, and even more so if you are beginning a business in a foreign country. Therefore, we have devised a professional service package to assist you and your team in becoming business-ready.

Our professional service for work permit applications covers:

• Work Permit Document Preparation & Submission Guidelines
• Support Renewal Every Two Years
• Support to apply dependent Permit Includes Spouse and Children
• Advise on Entry and Exit from Malaysia
• Assist with the Labuan Landing Procedure
• Assist on Visa Stamping at Labuan Immigration

From documentation to submission, our skilled and experienced team will assist with the full work permit application process for both directors and employees, ensuring that you and your team acquire the necessary approvals to launch your firm as quickly as possible.

The Malaysian Second Home Program (MM2H), the Malaysian local private limited company (Sdn Bhd) work permit and the Labuan firm work permits are among the several possibilities for foreigners to obtain a long-term stay in Malaysia (which is called the Labuan director visa). They serve the same purpose, yet permissions are provided by distinct authorities. At this time, we believe that the Labuan director visa or company work permit will be the simplest option due to the lesser criteria compared to the other two options.

To obtain a Labuan director visa or work permit, you must first establish a Labuan corporation. Once the firm is established and the company must need to rent a shared physical office, you can begin to apply for a Labuan director visa or work permit. A work permit application might take a minimum of 45 working days if there is no further query from LFSA. The projected timeline will start upon submission of all required papers, and the checklist can be shared upon email request.

After the application is granted, you will be required to fly to Labuan to obtain your Labuan director visa or work permit. The visa will offer you a two-year entry permit to Labuan and West Malaysia (including places such as Kuala Lumpur, Johor Bahru, and Penang).

FAQs – Frequently Asked Questions

Why should I set up a Labuan Offshore Company in Malaysia?

• 100% foreign ownership
• Corporate tax rates as low as 3%
• Minimum paid-up capital USD 1

Do I need to appoint a company secretary?

Yes, you will need at least one company secretary for your offshore company.

Is Labuan Tax Haven?

Even though Labuan has exceptionally favorable tax exemption provisions, it is not a tax haven because tax reporting and filing requirements are severely enforced.

Is it a requirement to appoint a Malaysian Director?

There is no requirement for a Labuan company to appoint a Malaysian local director

Can the same person be the director and the shareholder?

Yes

Does Labuan company registration need a physical presence in Malaysia?

No. However, they are required to engage the services of a Labuan secretary company, which will serve as their registered office in Labuan instead.

Can Bank accounts be opened using a Labuan Company?

Yes

Can a Labuan Company hire local Malaysian to work?

Yes

Does Labuan company need to prepare any Audit?

A Labuan corporation must maintain accurate accounting and other documents in Labuan, which must be retained at the company’s registered office in Labuan. These accounting and other records must be open and available at all times for inspection by the company’s directory.

What is the difference between trading and non-trading activities?

Non-trading activities pertain to a Labuan entity’s investment holdings of securities, stocks, shares, loans, deposits, or other properties. In contrast, the Labuan IBFC definition of trading activities includes trading, management, licensing, shipping operations, banking, insurance, and any other business that is not a Labuan non-trading activity.

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.