Latest on Labuan Company Tax
Below is the guide on the latest of Labuan Company Tax for corporate as well as individual for your understanding. Labuan company’s activity permitted to carry on in, from or through Labuan in any foreign currency other than Malaysian currency with non-resident or with another Labuan entity. It is also permitted to deal with local Malaysian entities with the requirement of reporting to Labuan FSA.
For Labuan Company corporate tax annual filing, the assessment will be based on the activities carried out during the year. The financial year end for all Labuan companies is fixed on 31st December each year. For all our clients, we assist in opening of the corporate tax file (Form LE) and perform yearly tax filing with Labuan Inland Revenue Board (IRB). The dateline of submission is by 31st March annually, extendable to 31st May (subject to IRB’s discretion).
There are three choice (3) options of tax election for the Labuan Company based on nature of activities as follows:
A. For Trading Company
Trading activity of a Labuan Company is defined as carrying activities, which include banking, insurance, trading, management, financing, import, export, trading, agency, wholesaler, consultancy and advisory. The corporate tax will be 3% (with audit report required) or elect to pay flat fee of RM 20,000 (with management account required).
B. For Investment Holding Company
Labuan Company can act as an investment holding(non-trading activity), that includes the activities relating to the holding of investments in securities, stocks, shares, loans, deposits and immovable properties in Malaysia or outside Malaysia. The corporate tax will be 0%, no audit reporting required except for management account.
C. For Dormant (inactive) Company
Labuan Company which is dormant also required to submit relevant tax documents. However, there is no tax and audit reporting required except for management account for a dormant company.
D. Dealing with Malaysian Resident
Labuan company that dealt with Malaysia resident (individual or corporate) will be subjected to tax under the Malaysia onshore Income Tax Act 1967 with a tax rate of 24% on net profit. The account has to be audited and file to both Labuan IRB as well as local IRB annually. For more info, please click here!
Please refer to FAQ on Labuan Company Tax for more information.
Latest Labuan Company Tax- Employer’s Return and Personal Income Tax
Every Labuan company is obliged to comply with IRB’s regulations to lodge Employer Return (Form LE) declaring the number of staffs employed in the Company and every employees has the duty to file their Personal Income Tax (Form BE) on yearly basis. For Malaysians, the personal income tax filing is only applicable for earning more than RM30,000 per year. [Further reference: Personal Income Tax for Expatriates]
The annual due date for Employer Return (Form E) filing is 31 March file by the company while the Personal Income Tax (Form BE) filing is 30th April with IRB by the individual working in a Labuan company.
Latest Personal Income Tax Rebates – For Expatriates and Malaysians
There are four (4) main tax exempt incentives applicable up to year 2020 working in a Labuan Company for the following capacity:
1. Exempt expatriates from the payment of income tax in respect of fees received by that individual in his/her capacity as a director of a Labuan entity.
2. Exempt any person (expatriates or Malaysians) from payment of income tax on 65% of the statutory income derived from a source consisting of the provision of qualifying professional services (legal, accounting, financial and secretarial services) rendered in Labuan by that person to a Labuan entity.
3. Exempt expatriates from the payment of income tax on 50% of gross income received by that individual from exercising an employment in a managerial capacity with a Labuan entity in Labuan, co-located office or marketing office.
4. Exempt Malaysian citizen from the payment of income tax on 50% of gross housing allowance and gross allowance received by that individual from exercising an employment with a Labuan entity in Labuan.
Late lodgement will subject to penalty directly imposed by the IRB Authority. The consequences by failing to comply with the regulations may effect the renewal visa process. Feel free to email us at firstname.lastname@example.org if you need assistance for your Labuan Company tax issues. We “simplify the complexities” !