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Establish a Subsidiary in Labuan

Establish a Subsidiary in Labuan

Companies from abroad can easily set up subsidiaries in Labuan as local Malaysian companies in respect to the rules and regulations of the Offshore Companies Act 1990. Being independent entities, subsidiaries in Labuan can operate as partnerships or as limited companies, public or private. The registration procedure of a subsidiary in Labuan, an important offshore jurisdiction, is simple and less bureaucratic, but for avoiding any misunderstandings or the language barrier, we invite you to talk to our team of  Labuan company formation agents for complete assistance at the time of company registration.

How can I register a subsidiary in Labuan?

The registration of a subsidiary in Labuan starts with the Regional Registrar of Companies in Labuan and a particular form which comprises information about the parent company that intends to set such entity in Malaysia, the name of the representative with establishments in this country and details about the company’s main activities must be filed. Also, the Articles of Association stands at the base of subsidiary formation and consists of the following information:

  • the name of the subsidiary which can be different from the parent company;
  • the name of the foreign owners of the subsidiary and the country of residence;
  • the business address for the subsidiary established in Labuan;
  • the board of managers and the name of the representative agent of the company;
  • the activities of the subsidiary as established by the company from abroad.

Please mind that if you want to set up a subsidiary in Labuan in 2024 you are legally required to have a business address in the city/region where you wish to incorporate your business. A registered business address is part of the mandatory process for company formation in Labuan.

Labuan company formation is an easy process which can be entirely explained by our team of company incorporation specialists in Labuan.

Who can establish subsidiaries in Labuan in 2024?

Any foreigner who wants to do business in Labuan can set up a subsidiary, an independent entity that respects the company’s rules and activities, and also the laws in Malaysia. This needs to receive the approval of the Companies Commission of Malaysia.

The most commonly used business form by those who wish to open a company in Labuan is the Sdn Bhd Co., because this business form can be used by foreign investors, it can serve as a fully owned foreign subsidiary and can be used to engage in business activities in Malaysia. some limitations do apply on the types of businesses that can be conducted and these include the telecommunications sector as well as the manufacturing sector. One of agents can provide more information about the businesses that can be conducted under a business form incorporated in Labuan.

A foreign company that incorporates a subsidiary in Labuan will have a direct or indirect ownership interest in the said subsidiary. This is expressed as a percentage and, in some cases, it can be 100%. For example, a Pte. Ltd. from Singapore can have a 100% ownership interest in its Labuan subsidiary. 

When opening a company that will be used as a subsidiary, an important part of the process is to prepare the needed documents. For this purpose, the founders will need to provide:

  • proof of identity: their valid passports or a valid national ID card for Malaysian founders.
  • proof of being fit and proper: the condition to be “fit and proper” is one that is determined based on the person being competent, financially sound, reputable, reliable and of good character; this can be shown through reference letters as well as a letter of good conduct from the police or relevant governmental bodies in the founder’s country of residence.
  • proof of address: documents that indicate the founder’s residential address; may include an original utility bill, a bank statement or a bank reference that confirms the address.
  • others: can include documents that are required to perform a background check; may vary from one case to another. 

Company formation in Labuan is a fairly simple process that can be further streamlined when working with our agents. Investors who are interested in opening a subsidiary here can reach out to our agents and find out more about the needed documents.

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Can a subsidiary have a different name in Labuan?

Yes, subsidiaries in Malaysia are independent and can be established under a different name. This structure needs to respect the local incorporation and the tax reporting conditions.

The limitations of the branch determine many investors to open a subsidiary in Labuan. The foreign company will not directly control the subsidiary, as in the case of the branch, but it will own shares, which will allow it to retain a certain level of control. The subsidiary can be partly or wholly foreign owned. 

Conditions for subsidiaries in Labuan in 2024

The subsidiary is incorporated just as a locally registered company. This is applicable in many other jurisdictions and, in Labuan, it means that the company will benefit fully from the advantages that are available to businesses here. Below, our team of Labuan company formation agents lists some of the important conditions for the subsidiary: 

  • Capital: investors who open a company in Labuan that will serve as a subsidiary will only pay a capital of 1 US$.
  • Taxation: this structure needs to respect the local incorporation and the tax reporting conditions; it will be taxed as trading or non-trading, as applicable.
  • License: the subsidiary will function based on a license for its activities, either for business or industrial.

The taxation regime is particularly advantageous in Labuan and it can be divided according to the type of activity the subsidiary undertakes:

  • for a trading company: there is a 3% tax on trading profits;
  • for the non-trading company: the tax is 0% for holding activities.

Investors should know that the trading activities include banking, insurance, shipping, while the non-trading ones include securities investment holdings, stocks holdings and others. In practice, the non-trading company will be a holding company in most cases. One of our agents specialized in Labuan company formation can provide you with more details according to the specific type of business activity in which the company will be involved. 

If you wish to open a subsidiary in Labuan in 2024, our team can assist you in preparing the documents as well as making the needed submissions. In most cases, your need to travel to Labuan will be reduced and, if possible, even eliminated with our help. Our team is able to offer the needed assistance through a special power of attorney, a document concluded for the specific one-time event related to the incorporation. You can reach out to us to find out more.

Requirements and reporting for the Labuan company subsidiary

The subsidiary, being a Labuan company, is subject to the incorporation requirements that apply to this business form. Before registration, investors should know that the following apply for companies that will be incorporated under the Labuan International Business and Financial Centre:

  • the company is required to have at least one director and one resident secretary;
  • the shares that will be issued will not have a nominal (or par) value; treasury shares are an option;
  • bearer shares are not permitted;
  • two or more companies can merge;
  • the shareholding, management and the financial information, as well as the transaction-related information about a Labuan company, is not to be divulged.

The Labuan company that is used as a subsidiary is subject to the Labuan Business Activity Tax Act 1990 and it subject to licensing according to the Financial Services and Securities Act 2020 and/or the Labuan Islamic Financial Services and Securities Act 2010. These companies are allowed to engage in business with a Malaysian resident once a notification is filed with the Labuan Financial Services Authority within ten working days of the transaction.  Such a business transaction is to take place in another currency apart from the Ringgit (except in the case of receiving fees and commissions as well as in a few other cases). We mention that the activities for which the Labuan IBFC regulations described herein apply to may include those that engage in banking, insurance or reinsurance and other insurance-related services, fund management, leasing, company management businesses. 

Some of the main operational requirements for Labuan companies used as subsidiaries in the financial services sector include the following: regulatory reporting, license applications, and operational applications. Regulatory reporting is performed by using the Financial Services Authority’s Statistical Management System.

For companies in the financial sector, other than banking, the following guideline is useful in order to understand the general principles of annual reporting:

  • the reporting frequency: yearly, half-yearly or quarterly.
  • the due date: 15 days after the closing of the reporting period.

The types of companies to which this applies are leasing companies, Labuan trust companies, international commodity trading companies, money brokers, fund managers, and others.

Our team of agents who specialize in company formation in Labuan can provide more details.

Additional information

As seen above, there are many advantages related to company formation in Labuan, making it suitable for subsidiary incorporation. In addition to paying attention to the applicable tax regime, and following the annual audit obligations (only for trading companies), the company can be incorporated with only one director and one shareholder, with no requirements for nationality (they can be foreigners).

If you will register a subsidiary in 2024, you will need to select one of the legal entities prescribed by the local legislation. This will create accounting obligations, in accordance with the company type selected. Depending on the particularities of your business, audit formalities may also be required.

The services of a trust company can be used when opening a Labuan company. In this case, the said trust company will act as the incorporation agent. In some cases, the Labuan Companies Act specifies that this is required. These services can include but are not limited, to providing registered office services and secretary services (providing a resident secretary for the company as mentioned in the mandatory incorporation conditions), handling the main duties such as lodging any documents required under the Companies Act and allowing for specialized services such as trust officers who may act as resident directors and resident secretaries. 

The subsidiary, like any other Labuan company, will be subject to annual fees. We list some of these below, which are valid for 2024:

  • 15 US$: the application for the company name reservation.
  • 300 US$: the fee when the company has a paid-up share capital of 50,000 RMN and below this amount.
  • 1,500 US$: when the company has a paid up capital of 1 million RMN and above this amount.
  • 2,000 US$: the registration fee for a foreign Labuan company.
  • 1,500 US$: the annual fee for a foreign Labuan company.

There aren’t any fees for the registration of the statutory documents with the Labuan Financial Services Authority. Fee exemptions are prescribed for other submissions of papers, such as director’s consent, compliance declarations, etc.

As seen from this list of applicable fees, it can be more advantageous to set up a Labuan company compared to a foreign Labuan company. One of our agents who specialize in Labuan offshore company formation can provide investors with more details. Understanding the types of regulations applicable to different legal entity types is important before incorporating the business. This is why our team provides complete services that will also include assistance for selecting the most suitable business form when a foreign company wishes to enter the Labuan market by opening a subsidiary. 

Investors should also know that financial services providers in Labuan are subject to the regulations set forth by the Labuan Financial Services Authority. Our team can provide detailed information on the applicable legislation and guidance for the companies subject to regulation from this authority. 

Offshore company formation in Labuan can present many advantages, however, it is advisable to understand the conditions as the limitations, in some cases, for offshore legal entities.

For a better understanding of how subsidiaries are registered in Labuan please feel free to contact our team of company formation consultants in Labuan.

Investors who want to set up a subsidiary in Labuan in 2024 or any other type of company must know that there are new regulations imposed to businesses, under the latest legal amendments.

The new law requires companies to have at least 1 director in their management structure. Starting with 9 February 2023, at least 1 director must be a natural person. Companies that already have 1 director who is a natural person appointed for this function must file certain documents that show proof of this, by filing a Return on Particulars and Changes of Directors and Secretaries (Form 25). The requirement is applicable in 2024 to foreign companies as well.