Latest on Labuan Company Tax

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.
 

A Labuan company’s activity is permitted to carry on the activity in, from or through Labuan, in any foreign currency as well as Malaysian currency, with non-resident or with another Labuan entity or even local Malaysian entities! To get to know the latest 2021 Labuan tax changes and law in great detail, please visit here.

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 usually fixed on 31st December each year (unless you apply for a different date).

Ready assistance to our clients

For all our clients, we assist with the 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 choices (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% on profits (with audit report required) subject to complying with the latest substance requirements or otherwise, 24% as per the local tax legislation. To understand more on the substance requirements, please read here.

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 used to be 0% with no audit reporting required except for management account. Under the latest tax changes, there are 2 categories of investment holding:

i. Pure Equity Holding Labuan Company (hold equity participation and earn receive interest from dividend monies or capital gain proceeds from disposal of shares) – the corporate tax rate of 3% on net profits may be enjoyed provided that (1) control and management is established in Labuan and (2) a minimum annual operating expenditure (OPEX) of RM 20,000 is spent in Labuan. Otherwise, the corporate tax rate of 24% will apply.

ii. Non-Pure Equity Holding Labuan Company (hold variety of assets and earn different types of income such as interests, rents and royalties) – the preferential tax rate of 3% on net profits may be enjoyed subject to substance fulfilment of (1) at least one full time employee employment in Labuan and (2) a minimum annual operating expenditure (OPEX) of RM 20,000 is spent in Labuan. Otherwise, the corporate tax rate of 24% will apply.

C. For Dormant (Inactive) Company

Dormant or inactive Labuan Company are required to submit relevant tax documents on an annual basis until the company is officially struck off or removed from the Labuan Register. Generally, due to the nature of the company, management accounts will suffice with no tax and audit report required.

D. Irrevocable election of Inland Tax Act 1967 (Local Onshore Malaysian Tax Law)

Labuan company that have opted to be taxed under the Malaysia Onshore Income Tax Act 1967 will  follow the local corporate tax rate of 17% on the first RM 600,000 followed by 24% on subsequent chargeable income. The accounts has to be audited by an approved Labuan auditor and be filed to the 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

Malaysia Inland Revenue for Labuan Company 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 employee has the duty to file their Personal Income Tax (Form BE) on a yearly basis. For Malaysians, the personal income tax filing is only applicable to earnings of 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, which is to be filed by the company, while the Personal Income Tax (Form BE) filing is 30th April by the individual working in a Labuan company, with Inland Revenue Board of Malaysia.

Latest Personal Income Tax Rebates – For Expatriates and Malaysians

There are four (4) main tax-exempt incentives applicable up to the year 2020 for those working in a a Labuan Company. Only one (1) incentive has been extended (see below):

  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. (Latest 2021 update: This exemption has been extended for another five (5) years until YA2025 as per the latest Labuan Directive issued on 4 December 2020). 
  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. (Expired on 31 December 2020)
  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. (Expired on 31 December 2020)
  4. Exempt Malaysian citizens from the payment of income tax on 50% of gross housing allowance and gross allowance received by that individual from exercising employment with a Labuan entity in Labuan. (Expired on 31 December 2020)
 
Late lodgment will be subjected to penalties directly imposed by the IRB Authority. The consequences of failing to comply with the regulations may affect the visa renewal process.

Feel free to email us at contact@labuanbusiness.com if you need assistance with your Labuan Company tax issues with our in-house Labuan Tax Expert!

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    Latest on Labuan Company Tax

    Latest on Labuan Company TaxBelow is the guide on the latest of Labuan Company Tax for corporate as well as individual for your understanding.

    A Labuan company’s activity is permitted to carry on the activity  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 certain requirement on 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.

    Ready assistance to our clients

    For all our clients, we assist in the 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 choices (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).

    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 residents (individual or corporate)  that have opted to be taxed 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 the local IRB annually. For more info, please click here!

    Please refer to FAQ on Labuan Company Tax for more information.

    Malaysia Inland Revenue for Labuan Company Tax

    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 employee has the duty to file their Personal Income Tax (Form BE) on yearly basis. For Malaysians, the personal income tax filing is only applicable to 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 the 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 citizens from the payment of income tax on 50% of gross housing allowance and gross allowance received by that individual from exercising 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 affect the renewal visa process.