Labuan Company Tax Compliance Guide

All Labuan companies of trading or non-trading nature are required to submit its corporate tax returns to comply with Labuan Inland Revenue Board (IRB). The due date is by 31st March, and is usually extendable to 31st May. If you require further extension to 31st July, prior approval must be obtained. All Labuan companies’ financial year end closes at 31st Dec annually.

Altogether there are six (6) types of Labuan Company for corporate tax filling as follows:

1. For a Labuan Company that has not commenced any business since incorporation, it will be considered as a dormant company. There is no tax to pay, however management accounts must be submitted.

Labuan Company Tax Compliance Guide

2. For a trading Labuan Company, the tax rate is 3% with the requirement to submit Audited Financial Report. This also applies to a Labuan Company with net loss.

Labuan Company Tax Compliance Guide

3. For a Labuan Trading company who opt to pay RM20,000 tax, the submission of Management Account (unaudited account of profit, loss and balance sheet) to CP Trust is sufficient.

Labuan Company Tax Compliance Guide

4. For a non-trading investment holding Labuan Company, only management accounts submission (unaudited account of profit, loss and balance sheet) to CP Trust is required.

Labuan Company Tax Compliance Guide

5. For a Labuan company who has dual dealing with International and domestic Malaysia, the accounts must be made to separate both revenues. International revenues will be taxed at 3% on net profit, whilst domestic revenues will be taxed at 24% on not profit. Audited accounts must be prepared. Auditing has to be done even it loss is incurred but will not attract any tax.
[Read: Guide to Audit Process for Labuan Entity of Dual Dealings]

Labuan Company Tax Compliance Guide

 

6. For a Labuan company with permanent election to be taxed under the Malaysia Income Tax Act 1967, the tax rate of 24% shall apply on net profit, regardless if the revenues is generated abroad or locally.Under such election, the Labuan taxation law will no longer apply.

Labuan Company Tax Compliance Guide

Determination of Basis Period: Commencement of operations of a Labuan Company:

1. Accounts prepared for less than or more than 12 months ending in the following year (this is based on the IRB internal guidelines – Director General’s Circular No.2/1992)

Example 1
A company commences operations on 07.01.2010 and its first accounts are prepared for the period 01.07.2010 to 31.12.2011 (18 months).

The accounts are acceptable:
The accounting period 01.07.2010 to 31.12.2011 is the basis period for the Y/A 2012.
There is absent of basis period for the Y/A 2011 (the company is to be chargeable to tax RM 20,000 – refer to Section 8 of LBATA).

Example 2
A company commences operations on 01.07.2010 and its first accounts are prepared for the period for the period 01.07.2010 to 31.03.2011 (9 months)

The accounts are acceptable:
The accounting period 01.07.2010 to 31.03.2011 is the basis period for the Y/A 2012.
There is absent of basis period for the Y/A 2011 (the company is to be chargeable to tax at RM 20,000 – refer to Section 8 of LBATA).

2. Accounts prepared for 12 months ending on 31 December or other than 31 December

Where a company commences operations and its first accounts are made up for 12 months, that accounting period is the basis period for the year of assessment in which the accounts are closed.

Example 1
A company commences operations on 01.01.2010 and its first accounts are prepared for the period 01.01.2010 to 31.12.2010.

The accounts are acceptable:
The accounting period 01.01.2010 to 31.12.2010 is the basis period for the Y/A 2011.
(this is based on the IRB internal guidelines – Director General’s Circular No.2/1992)

Example 2
A company commences operations on 01.07.2010 and its first accounts are prepared for the period 01.07.2010 to 30.06.2011 (12 months).

The accounts are acceptable:
The accounting period 01.07.2010 to 30.06.2011 is the basis period for the Y/A 2012.
(this is based on the concessions given in the IRB & ALTC dialogue on 20/03/2001.This concession may be repealed at any time in the future)

3. Accounts prepared for less than 12 months ending on 31 December or on any date in the year of the Commencement of operations (end in the same basis year)
(this is based on the IRB internal guidelines – Director General’s Circular No.2/1992)

Example 1
A company commences operations on 01.07.2010 and its first accounts are prepared for the period 01.07.2010 to 31.12.2010.

The accounts are acceptable:
The accounting period 01.07.2010 to 31.12.2010 is the basis period for the Y/A 2011.

Example 2
A company commences operations on 01.07.2010 and its first accounts are prepared for the period 01.07.2010 to 30.09.2010 and subsequently to 30 September each year.

The accounts are acceptable:
The accounting period 01.07.2010 to 30.09.2010 is the basis period for the Y/A 2011.
The accounting period 01.07.2010 to 30.09.2010 is the basis period for the Y/A 2012.

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