Labuan

Labuan is a federal territory which is a part of the Federation of Malaya. Labuan is formed by several islands.

Capital

Bandar Labuan

Official language

Malay. English is widely spoken in the field of business communication, and is used as the language of corporate documents.

Government

Malaysia has a complex political system. Power is concentrated in the hands of nine hereditary sultans, from which the head of state is chosen every five years. Legislative power is concentrated in the hands of bicameral parliament, executive power is vested in the Prime Minister, who exercises it through the cabinet.

Currency

Ringgit (RM)

Economy

Labuan has a strong economy and stable political situation. Malaysian authorities have invested heavily in improving infrastructure in Labuan, which is now fully modernized. More than 50 world banks have branches in Labuan.

Legal system

The legal system is grounded on the English model, but offshore companies in Labuan are subject to special laws.

Corporate law

  • Offshore Companies Act, 1990
  • Financial Services Authority Act, 1996
  • Business Activity Tax Act, 1990
  • Trusts Act, 1996

Types of companies

  • International Company
  • Private Company Limited By Shares
  • Public Company Limited By Shares 
  • Branch Of a Foreign Company
  • Offshore Limited Partnership
  • Trusts

International Company (International Company)

  • The company's name shall use Latin alphabet. Special permission is required for the names containing the words: bank, building society, insurance, reinsurance, fund management, investment fund, trust, trustees, university, municipal or their foreign language equivalents.
  • Minimum share capital is one share that can be fully or partially paid. Usual authorized capital is USD 10,000. It can be divided into 10,000 shares of USD 1. The company may issue registered shares of par value, preference shares, redeemable shares and shares without voting rights. Bearer shares are not permitted.
  • The minimum number of shareholders is one, and the company also requires minimum 1 director. Directors may be both physical and legal persons. The company must have a resident secretary.
  • The company having no trade activities is not obliged to appoint an auditor and file financial statements.
  • Information on beneficiaries is not disclosed. The company shall disclose information on directors and shareholders to Labuan authorities for internal accounting, but not the individual owners.

Taxation of companies

Offshore companies having trading activities pay 3% of net audited profit or 20,000 RM (if audit is not required). Companies that do not have trading activities are exempt from all taxes.

Agreements on avoidance of double taxation

Since Labuan is part of Malaysia, it applies the treaties on avoidance of double taxation concluded by Malaysia. However, some agreements provide for certain restrictions on Labuan. Malaysia has concluded treaties with the following countries: Australia, Austria, Albania, Argentina, Bahrain, Bangladesh, Belgium, Brunei, UK, Hungary, Venezuela, Vietnam, Germany, Denmark, Egypt, India, Indonesia, Jordan, Iran, Ireland, Spain, Italy Kazakhstan, Canada, Qatar, China, Kuwait, Kyrgyzstan, Laos, Lebanon, Luxembourg, Malta, Mauritius, Mongolia, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Norway, UAE, Pakistan, Papua New Guinea, Poland, Russia , Romania, San - Marino, Saudi Arabia, Seychelles, Singapore, Syria, Sudan, USA, Taiwan, Thailand, Turkey, Turkmenistan, Uzbekistan, Fiji, Philippines, Finland, France, Croatia, Czech Republic, Chile, Switzerland, Sweden, Sri Lanka, South Africa, South Korea and Japan.