If you plan to start a business in Asia, Labuan, a federal territory of Malaysia is an excellent choice for registering your company. The Manimama team has conducted in-depth research, analyzed the main subtleties of incorporating in Labuan, and is ready to share its results and help you choose the right jurisdiction.

What are the main advantages of incorporating a company (business) in Malaysia (Labuan)?

1. Promising location in the Heart of the Asia-Pacific Region

Labuan is ideally positioned for companies expanding into Asia’s key markets, including China, India, Singapore, and Indonesia. This strategic location enables businesses to efficiently conduct international trade, and financial operations, and expand their presence in the rapidly growing Asian economies.

2. Favorable Tax Regime

Labuan is renowned for its attractive tax legislation, which allows businesses to reduce their tax burden significantly. Companies outside Malaysia can choose between a 3% corporate tax on profits or a fixed tax payment. Additionally, there is no capital gains tax, and dividends and royalties are tax-exempt, making the jurisdiction even more advantageous for entrepreneurs and investors.

3.100% Foreign Ownership and Free Profit Repatriation

Labuan allows full foreign ownership of companies without requiring local partners or nominee directors. This grants investors complete control over their business and finances. Moreover, there are no restrictions on profit repatriation, allowing business owners to transfer and manage their funds freely.

4. Reliable Regulatory Framework

Labuan offers a stable and transparent legal environment that complies with international financial regulatory standards. The jurisdiction adheres to Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations, enhancing trust among global business partners. The regulatory framework is both flexible and practical, striking a balance between compliance and business convenience.

5. Political and Economic Stability

As a federal territory of Malaysia, Labuan provides a favorable business environment backed by the country’s political stability. Malaysia boasts a well-developed financial system, a stable economy, and a strong commitment to attracting foreign investment. This ensures that businesses can operate in a secure environment without the risks associated with political instability or sudden regulatory changes.

How to register a company in Malaysia (Labuan) and what are the main requirements for such registration?

Step 1. Initial setup

• Initiating a preliminary project assessment, assessing risks, choosing the type of company, preparing the necessary documents and obtaining the necessary permits, determining the time frame, budget, and resources required to complete the process.
• Preparation and filing of the package of documents.

Step 2. Company registration

• Appointing a licensed Labuan trust company;
• Verification and reservation of the company name at the Labuan Financial Services Authority (FSA);
• Facilitating the notarial process for the company’s official registration;
• Opening a bank account and depositing a the share capital;
• Incorporating the company’s data into the Labuan FSA;
• Obtaining the Certificate of incorporation from the Labuan FSA, Memorandum and Articles of Association.

Requirements for registering a company in Labuan on the example of an International Business Company (IBC):

• Shareholders: the company is required to have at least 1 shareholder, who can be an individual or a corporate entity. There are no restrictions on nationality.
• Director: the company must have a minimum 1 director. The director can be a resident of any country.
• Company secretary: it must have at least 1 qualified resident company secretary. The secretary has to be appointed within 30 days of incorporation.
• Minimum share capital: the minimum capital requirement is MYR 1 (approx. €0,19). The Malaysian government does not put any restrictions on repatriation of capital, which provides flexibility for shareholders.
• Legal address: a Labuan company must have a registered office in Labuan, which can be a physical / virtual office / the office address of the company secretary.
• Liability: the liability of its shareholders is limited to the amount of capital they have invested in the company through their shares.
• Accounting: IBC is required to file an annual report containing a statement of their accounting records, which must be kept in Labuan.

What do you have to know about taxes when registering a company in Malaysia (Labuan)?

Corporate income tax (CIT):

• The basic CIT rate is 24%.
• But companies in Labuan that are engaged in international trade or finance can apply for a Labuan International Business and Financial Center (IBFC) status.
• Companies with IBFC status are subject to a tax rate of 3% of net profits per audited accounts.
• Non-trading (activity relating to the holding of investments in securities, stocks, shares, loans, deposits or any other properties situated in Labuan by a Labuan entity on its own behalf) companies are not subject to CIT in Malaysia, provided it has fulfilled the substance requirements.

Personal income tax (PIT):

The PIT rates are as follows:

• from MYR 5,000 (approx. €980) to MYR 20,000 (approx. €3,921) – 1%;
• from MYR 20,000 (approx. €3,921) to MYR 35,000 (approx. €6,862) – 3%;
• from MYR 35,000 (approx. €6,862) to MYR 50,000 (approx. €9,803) – 6%;
• from MYR 50,000 (approx. €9,803) to MYR 70,000 (approx. €13,724) – 11%;
• from MYR 70,000 (approx. €13,724) to MYR 100,000 (approx. €19,606) – 19%;
• from MYR 100,000 (approx. €19,606) to MYR 400,000 (approx. €78,426) – 25%;
• from MYR 400,000 (approx. €78,426) to MYR 600,000 (approx. €117,640) – 26%;
• from MYR 600,000 (approx. €117,640) to MYR 2,000,000 (approx. €392,134) – 28%;
• over MYR 2,000,000 (approx. €392,134) – 30%.

A non-resident individual is taxed at a flat rate of 30% on total taxable income.
An approved resident individual under the Returning Expert Programme having or exercising employment with a person in Malaysia can enjoy a tax rate of 15% for 5 years on income from an employment.

Value-added tax (VAT):

VAT is not applicable in Labuan.

For readers 

Manimama provides assistance in choosing the right jurisdiction for company incorporation and in registering a business specifically in Malaysia (Labuan). We have a good understanding of the tax and legal peculiarities of specific jurisdictions, which helps our clients make an informed choice based on their unique needs and development strategies. In our work, we take into account factors affecting the business environment, such as the level of competition, access to financial and human resources, as well as opportunities for further growth and development in different jurisdictions. 

By choosing our company formation service in Malaysia (Labuan), you are working with a law firm that values integrity, competence, and client satisfaction. Let us help you set up a company in Malaysia (Labuan) and pave the way for your business success!

Our contacts

If you want to become our client or partner, feel free to contact us at support@manimama.eu.

Or use our telegram @ManimamaBot and we will respond to your inquiry.

We also invite you to visit our website: https://manimama.eu/.

Join our Telegram to receive news in a convenient way: Manimama Legal Channel.