There are two kinds of Partnerships that can be formed through Labuan:
- Labuan Limited Partnership (Labuan LP)
- Labuan Limited Liability Partnership (Labuan LLP)
Two (2) main differences between Labuan Limited Partnership (Labuan LP) and Labuan Limited Liability Partnership (Labuan LLP) are as follows:
- a) Labuan LLP partner is not liable for another partner’s
misconduct or negligence - b) Labuan LLP is required to submit “Solvency Certificate” annually to Labuan
FSA on or before its anniversary of registration
Labuan Limited Partnership (Labuan LP)
The purpose and advantages of setting Limited Partnership:
- It allows for and easier to attract investors to become Limited Partners where liability is up to capital invested and terms are drawn up in the partnership agreement who only wanted their liability on their capital they invested and terms of the in the partnership agreement
- Shield Limited Partners from business debts and other liability
- A great choice for joint venture where partners can come together to share expertise and run the business while sharing profits
- Limited Partners can leave or be replaced without the need to dissolve the Limited Partnership
Characteristics of Labuan Limited Partnership (Labuan LP) Entity:
| Governing Act | Labuan Limited Partnerships and Limited Liability Partnership Act, 2010 (LPPA) |
|---|---|
| Suffix | "Labuan Limited Liability Partnership", ("Labuan)L.L.P","Labuan LLP",Liability Partnership,""Ltd.P.", "LP" or "L.P" |
| Composition of Partners | Minimum two with no more than 50 partners. Can be individual or corporate |
| General Partner (GP) | Min.one. Can be individual or corporate |
| Limited Partner (LP) | Min. one. Can be individual or corporate |
| Designation | A person can be GP and LP at the same time |
| Role of GP | Responsible day to day operations, have active role, a decision maker, ensure compliance with statutory obligations, with rights to share profits, liabilities and debts of the Labuan LP |
| Role of LP | Liability of LP limited to capital invested, but do not participate in daily operations. |
| If Labuan LP is formed to carry out Professional service | Corporate partners are not allowed |
| Partner Protection for LP | Liability only limit to the capital they invested but do not participate in the daily operations |
| Partnership Agreement | Is the governing documents determine the relationship between the partners, to be executed by all partners and lodge with Labuan FSA by Trust Co and it can be altered |
| Constituents documents | To be kept in Registered Office - CP Trust - your Secretary |
| Registered Office | Principal office of Secretary - CP Trust |
| Public Access | No, unless with the permission from the Directors/Shareholders |
| Accounts | To be kept in Labuan or Registered Office- CP Trust |
| Dissolution of Labuan LP | By lodgement of notice of dissolution to Labuan FSA, or upon death of GP or court order |
| Annual Compliance | 1.Annual Labuan FSA fee to be paid on or before anniversary of the incorporation date |
| 2.Annual Tax filing to IRB by 31st March, which is extendable to 31st May |
|
| Corporate Tax | Trading Activity: 3% with audited report or pay flat fee of RM20,000 with management account reporting |
| Non-Trading Activity: 0% tax with management account reporting |
|
| Business Transactions | In any foreign currency except Malaysia Ringgit |
| Gain on Distribution | Tax exempt on distribution of profits to partners |
| Withholding Tax | No withholding tax payable to non-residents on dividends, royalties, technical fee, management fee, lease rental and interest |
| Stamp Duty | Exempted on all instruments including transfer of shares relating to offshore business activities |
Labuan Limited Liability Partnership (Labuan LLP)
The purpose and advantages of setting Labuan LLP:
- Suitable for joint venture on professional services nature of business where it protects Limited Partners from personal liability from claims arising from the other partners’ incompetencies, errors, wrong business decisions or omissions
- It allows the Limited Partners to share profits and wanted their liability on their capital they invested and terms in the partnership agreement and shield them from business debts and other liability
- Limited Partners can leave or be replaced without the need to dissolve the Limited Partnership
- Good for perpetual succession
Characteristics of Labuan Limited Liability Partnership (Labuan LLP):
| Labuan LLP | Description |
|---|---|
| Governing Act | Labuan Limited Partnerships and Limited Liability Partnership Act, 2010 (LPPA) |
| Withholding Tax | No withholding tax for royalties, technical fee, interest and management fee payment |
| Suffix | "Labuan Limited Liability Labuan Limited Liability Partnership", "(Labuan) L.L.P." or "Labuan LLP" |
| Stamp Duty | |
| Role of LP | Liability of LP limited to capital invested, but do not participate in daily operations. |
| Role of DP | Responsible day to day operations, a decision maker, ensure compliance with statutory obligations, with rights to share profits, liabilities and debts of the Labuan LLP. Personal liable to penalities imposed onto Labuan LLP for contravene the LPP Act |
| Registered Office | Principal office of Secretary- CP Trust |
| Public Access | No, unless with the permission from the Directors/Shareholders |
| Partnership Agreement | Is the governing documents determine the relationship between the partners, to be executed by all partners and lodge with Labuan FSA by Trust Co and it can be altered |
| Partner Protection | Permits a partner to be shielded from liability of partnership obligations created by misconducts, wrong doing,etc |
| Limited Partner (LP) | Minimum one, can be individual or corporate |
| If Labuan LLP is formed to carry out Professional service | Corporate partners are not allowed |
| Gain on Distribution | Tax exempt on distribution of profits to partners |
| Dissolution of Labuan LLP | By lodgement of notice of dissolution to Labuan FSA, or upon death of GP or court order. |
| Designation | A person can be DP and LF at the same time |
| Designated Partner (DP) | Minimum one, can be individual or corporate |
| Corporate Tax | Trading Activity: 3% with audited report or pay flat fee of RM20,000 with management account reporting |
| Constituents Documents | To be kept in Registered Office- CP Trust- your secretary |
| Composition of Partners | Minimum two with no more than 50 partners. Can be individual or corporate |
| Business Transactions | In any foreign currency except Malaysia Ringgit |
| Annual Compliance | 1.Annual Labuan FSA fee to be paid on or before anniversary of the incorporation date |
| Accounts | To be kept in Labuan or Registered Office- CP Trust |
| Non-Trading Activity: 0% tax with management account reporting |
|
| 2.Tax filing to IRB by 31st March, which is extendable to 31st May |
|
| 3.Submit “Solvency Certificate” to Labuan FSA on or before the anniversary of date of incorporation |
|
Feel free to email us at contact@labuanbusiness to find out if Labuan Partnership entity is right for your business nature. We “simplify the complexities” of your investment in Labuan Jurisdiction!