FAQ on Labuan Company Management Business

FAQ

The FAQ on Labuan Company Management Business License will answer your concerns about the latest license guidelines issued by the Labuan Authority on 1 March 2021. Labuan Company Management Business License allows for the provision of treasury processing services and related services. To understand more at a deeper level, please visit the full information page.

Here are some frequently asked questions (FAQ) on Labuan Company Management Business License for your further understanding:

  1. An incorporated Labuan company registered under Labuan Companies Act 1990 with qualified personnel.
  2. An entity that is already regulated as company management in its origin country may be eligible to apply as well.

The applicant must show:

  1. A credible and viable business plan that sets out the approach to implement the proposed business objectives or operations;
  2. A set of internal policies and controls that commensurate with the business profile or risks;
  3. Board members and senior management that have the competency and experience to undertake company management business; and
  4. No adverse report on the shareholder or directors of the company or applicant. All must be fit and proper persons.


We will advise any other requirements to fulfil based on your profile to attain the best possible chance of obtaining approval from the Labuan Authority.

Yes, it is allowed. Do note that the non-deductibility rules as per Income Tax (Deductions Not Allowed for Payment Made to Labuan Company by Resident) Rules 2018 (Amendment) 2020 [P.U.(A) 376/2020] will be applicable for payments made by a resident to the Labuan Company Management.

i. Back-room and middle office services

This includes the provision of administration and support services on business settlements, clearances, record maintenance, statutory compliance, etc.

ii. Act as authorised representatives for support services

This refers to acting as agent to provide support services on behalf of its client for a commission or a fee. The support services may include business advisory management or administrative support excluding any form of financial advisory services undertaken by other financial institutions licensed under the Labuan Financial Services and Securities Act 2010 (LFSSA) and Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA).

iii. Intermediation functions

This means acting as an arranger between two parties as intermediary and shall exclude any form of financial intermediation services undertaken by other financial institutions licensed under the LFSSA and LIFSSA. The intermediary functions may include providing support in terms of sales contacts, processing of orders or invoices, supplying market information or providing technical support to facilitate the international trades or imports and exports.

  1. Maintain paid up capital (unimpaired by losses) of a minimum of RM 100,000 or its equivalent to any foreign currency.
  2. Place a non-interest bearing security deposit with Labuan FSA of RM 100,000 or its equivalent to any foreign currency.
  3. Comply with substance requirements – having a minimum of two full time employees (FTEs) and RM 100,000 annual expenditure – to enjoy preferential tax rate of 3% on net audited profits per annum.
  4. Establish an adequate set of internal policies and controls for its operations, compliances, corporate governance and risk management.
  5. Obtain prior approval from Labuan FSA on these matters:
    1. Change of business plan;
    2. Change of 10% or more of shareholding;
    3. Appointment of board of directors and principal officer;
    4. Reduction of paid-up capital;
    5. Use of external provider; or
    6. Change of name.
  6. Notify Labuan FSA within 14 days pertaining to the following matters:
    1. Resignation of directors and principal officer;
    2. Change of place of business or office in Labuan;
    3. Change of its constituent documents; or
    4. Significant event that affects its going concern or reputation.
  7. Ensure persons in control, directors and officers are fit and proper. Employees must be competent and possess sound knowledge of the services to be offered.
  8. Maintain adequate and proper records and books of accounts in Labuan. Its name, license number must be clearly indicated on its letterhead, stationery and other documents.
  9. Comply with the applicable laws, rules and regulations relevant to the company management business, including guidelines issued by Labuan FSA and relevant authorities.

It is a mandatory requirement. The office must be independent from the offices of other entity/company and is able to be used for carrying out their business operations and must also comply with the relevant local authorities’ requirement with regard to the operational office, whichever applicable.

Labuan entities which are related companies within the same group are allowed to share office space in Labuan. However, each entity needs to comply with the minimum number of full-time employee requirement and annual operating expenditures as specified under the Substance Regulations.

The security deposit of RM100,000 to be placed with Labuan FSA is intended to undertake any liabilities arising from the operations of the licensed company management in Labuan IBFC.

Yes, it is mandatory. Auditors are required to inspect the accounting records and to calculate the corporate tax payable to Inland Revenue.

The corporate tax rate is 3% on net profits provided the substance requirements are met. Otherwise, it will be 24% on net profits. All accounts must be audited.

The Labuan Entity would not be eligible to enjoy the LBATA Tax preferential treatment e.g. tax rate of 3%. Consequently, it will be taxed under ITA.

The key benefit is that the Labuan Company can take advantage of the Double Tax Treaties that Malaysia signed with more than 70 countries. The full list of the DTAs shall be available to them if they chose to elect to be taxed permanently under the local Malaysia Income Tax Act 1967.

For more information please visit our page on Malaysia DTAs for Labuan Entities here! or visit the Malaysia Inland Revenue website at www.hasil.gov.my.

The deadline for all Labuan Tax filing is by 31 March every year. At the sole discretion of the Labuan Inland Revenue Board, a Labuan company may apply for extension of submission deadline up to 31st July. For more information on Labuan company corporate tax compliance, please click here!

It is best to set at 31st December every year, this avoids the absence of basis-period.

SST is not applicable with dealings with international and Labuan entities. However, SST registration is mandatory with Customs Malaysia once you have a first annual turnover of RM500,000 dealing with Malaysian entities with a tax of 6%.

Under the Inland Revenue Board’s law, all companies are to keep their accounting records for 7 years.

The annual license fee of USD 1,500 is payable upon grant of license and by 15 January of each year.

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