Labuan Entities on Dealing with malaysian Residents

Labuan being a midshore jurisdiction has a provision to permit most Labuan entities to deal with Malaysian Residents (individuals or companies). This special feature allows owners of Labuan entities to tap into Malaysia markets should opportunities arise. The permission requires a notification with the relevant information on the dealing and the corporate tax rate will be 24% with audited financial.  

4 main areas where reporting is not required:

  • Labuan entity carrying on banking, insurance or financial business licensed by Labuan FSA
  • Dealings with residents for administrative and statutory requirements, professional contacts such as auditor, attorney, accountant, management company, investment adviser, book keeping service, etc.
  • Labuan entity acting as a Holding Company of Malaysian Domestic companies (Sdn Bhd).
  • Carrying out businesses with companies fully owned by a Labuan Trust Company

Dealing with Malaysian Residents

Labuan business is defined as all activities with non-Malaysians and is subject to LBATA tax regime while non-Labuan Business is subjected to Malaysia Income Tax Act 1967 entirely.

Dealing with Malaysian Residents (individuals or corporate) requires reporting within ten (10) working days to Labuan FSA. Any delay will attract penalty by Labuan FSA. General activities that require reporting includes the following:

  1. Commercial dealings relating to income from purchase and sales of goods and services 
  2. All types of real estates investments within Malaysia

[Read: Guide to Lodgement of Dealing with Malaysia Residents]

LBATA Tax Regime:

For Trading nature of a Labuan entity, you can opt the following tax options of either:

1. 3% on net profits with audited account; or
2. Pay RM20,000 with management account

For non-Trading nature of a Labuan entity declared as an Investment Holding, the financial accounts need not be audited. The tax gain is fully exempted.

Labuan Trading Company Auditing Process for Labuan Business and Non-Labuan Business

The audit process of a Labuan Company which has international and Malaysia revenues is as follows:

Labuan Entities Dealing with Malaysian Residents

Feel free to contact us at contact@labuanbusiness.com for more information on the dealing with Malaysian entities. We “simplify the complexities” of your Labuan set-up to meet your objectives.

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