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Open an International Company in Labuan

Open an International Company in Labuan

Labuan is a special region of Malaysia where investors can benefit from numerous tax incentives when opening an international company. The company formation procedure is much simpler in the jurisdiction of Labuan than in others and businessmen can choose from two main types of companies: Labuan international company (IBC) and the Sendirian Berhad (SND BHD) – which refers to a private company. Those who are interested in opening a company in Malaysia can register a Labuan international company (IBC), which provides several advantages, many related to the taxation of the entity. Our team of company formation consultants in Labuan can offer in-depth details related to the registration of this type of legal entity. 

 Quick Facts  
Authorities overseeing Labuan IBCs

– Labuan Financial Services Authorities (FSA),

– Inland Revenue Authority,

– Malaysia Immigration Department,

– Central Bank of Malaysia

Residency requirement to open IBC

The director must be a Malaysian resident or have the appropriate Labuan business visa.

Corporate income tax rate for IBCs

– 0% for non-trading activities,

– 3% for trading activities

Minimum paid-up capital

USD 1

VAT (GST) for IBCs

Not applicable

Minimum number of directors and shareholders

1

Process of opening a Labuan IBC

– reserve company name,

– register office address,

– submit documentation

Licenses required

For specific businesses (banking, insurance, leasing, company management, etc.)

Business transaction currency

Any other than Malaysian Ringgit

Company name Any word or abbreviation from the national language of any country, as approved by the Labuan Financial Services Authority.
Timeframe for incorporation

You can open a company in Labuan in approximately 2 weeks.

Incorporation documents

– Memorandum and Articles of Association,

– application form,

– director’s consent,

– personal IDs of director,

– proof of paid fees, etc.

Company secretary

A Labuan trust company must serve as secretary.

Advantages of opening an international business company in Labuan

– favorable taxation regime,

– access to international markets,

– high level of confidentiality,

– benefits offered by an international financial center,

– operating as an offshore entity, etc.

Assistance

Our package includes the Labuan offshore company formation, the registered address, and the company secretary.

We also assist in obtaining the Labuan business visa for foreign entrepreneurs. 

Characteristics of Labuan companies

Labuan entities have the flexibility to organize themselves as companies limited by shares, companies limited by guarantee, or unlimited companies. There is also the option to open a Labuan offshore company.

Companies, including Labuan international companies, are eligible to enjoy attractive tax benefits provided under the Labuan Business Activity Tax Act 1990 (LBATA). Legal entities are allowed to engage in various business activities permitted in Malaysia, conducted in, from, or through Labuan.

Labuan companies may need to obtain licenses if they intend to undertake specific businesses as defined under the Labuan Financial Services and Securities Act 2022 or the Labuan Islamic Financial Services and Securities Act 2022. These businesses include: banking, insurance, fund management, leasing, factoring, and company management. An SPV in Labuan can be considered as a choice for other financial purposes.

Both residents and non-residents of Malaysia can establish Labuan companies. They are also allowed to own controlling stakes in Malaysian domestic companies, facilitating cross-border investment activities.

Our team can help you open a company in Labuan, based on your specific business needs.

Incorporation of an international company in Labuan  

Foreign investors interested in company incorporation in Malaysia should perform several compulsory steps in order to open an IBC in Labuan. The businessmen will first have to register the company, a process that starts by establishing the business purpose of the entity, as well as its internal structure. The businessmen will also have to propose up to three trading names for the business. Similar to setting up an IBC, interested investors also have the option to open an SPV in Labuan.

Foreign entrepreneurs will also need to obtain relevant visas when registering an IBC in Labuan, Malaysia and in this sense we mention that it is necessary to obtain the Labuan business visa. An international company registered here will have to comply with the following relevant authorities:

  • the Labuan Financial Services Authorities (FSA);
  • the Inland Revenue Authority;
  • the Malaysia Immigration Department;
  • the Central Bank of Malaysia.
international company in Labuan

Taxes for IBCs in Labuan

The tax regime for international companies in Labuan is appealing to foreign investors who decide on such type of company in Malaysia. For instance, trading companies do not need to pay the 3% tax rate on profits, but a fixed tax of RMB 20,000 or approximately USD 5,000 without having to consider an audit. As for the investment holding companies in Labuan, they do not need to pay taxes in this offshore jurisdiction. Import and export companies in Labuan require audit reports and need to consider the 3% tax rate imposed on net profits. 

Non-trading companies in Labuan are not subject to taxation.  It is good to know that IBCs in Labuan are not subject to VAT, sales tax, or GST. There are varied requirements to consider at the time an international company in Labuan is established, but complete information in this matter can be obtained from our team of company formation agents in Labuan.

Our team of company formation representatives in Labuan can offer more information related to the compliance with the local authorities.  Also, you are invited to watch the video below that explains the formalities for IBC formation in Labuan

Comparison between IBC and Snd Bhd

The differences between IBCs and Snd Bhd companies in Labuan will determine the business direction of a foreign entrepreneur in Malaysia. For instance, there is no need for a trade license for import and export activities as an IBC in Labuan, compared to a Malaysian Sdn Bhd. In terms of taxes, the international and local sales of an Snd Bhd are subject to a 24% tax rate.

As for an IBC in Labuan, the international sales are subject to a 3% tax rate. As a common thing between the two types of companies, we mention that the double taxation agreements signed by Malaysia with countries worldwide are protecting such businesses from paying the taxes twice. Feel free to address your inquiries to our team of advisors and solicit assistance and information when opening an international company in Labuan.

In addition to IBCs and Snd Bhd companies, there is also the option to open an SPV in Labuan.

Management of a Labuan International Company

The management of an IBC in Labuan is not subject to harsh requirements, however, it is best to observe a few facts in this sense. For example, the owners of such companies can decide on one director who will be in charge of the daily operations of the company. Having easy management allows foreigners to determine the business direction and implement the company’s strategies. Also, having 100% ownership in the company is one of the main advantages of opening a Labuan International Company, bearing in mind that ownership is completely secured.

Opening an international company in Labuan for varied benefits

Among the advantages of an IBC in Labuan is that the owners can easily obtain the residency visa. There are lower costs for setting up such companies and the management is not subject to harsh formalities as there is no need for more than just one director. Registering for tax purposes is less restrictive and more than that, the taxation regime is appealing to many investors from abroad. IBC owners do not need to apply for special licenses and permits compared to Malaysian Sdn Bhd companies.

Opening an SPV in Labuan also offers numerous advantages for interested investors. Our specialists in company incorporation in Labuan can provide more details if interested.

The advantages of a Labuan international company  

The Labuan international company provides several advantages to its investors. Firstly, it allows the registration of the company with 100% foreign ownership. The minimum share capital of the company is established at USD 1 and the business entity can have up to 50 shareholders. Such companies do not require obtaining trading licenses for various activities, which are normally required for other business forms. 

At the same time, they benefit from the provisions established by the double taxation treaties enforced here. The tax for the company’s net profits is set at 3% for international sales, while sales performed in Labuan, Malaysia, are taxed at the rate of 24%. 

An SPV company in Labuan also offers plenty of advantages and is an alternative option for those who do not wish to open an IBC in Labuan.

If you arrive here for the purpose of starting a Labuan offshore company, you must know that you will need to comply with certain immigration requirements. Foreign investors have to apply for a visa and if the conditions are satisfied, they will initially obtain a visa with a validity of 2 years, a period on time in which investors can relocate here with their spouse and children.

Short conclusion about IBCs in Labuan

A Labuan international company can be easily established if the main steps of the process are respected. The first one refers to the registration of the business by submitting the needed documents, followed by the application for Labuan business visa, the opening of a bank account , and the registration for tax purposes. The Inland Revenue Authority, the Central Bank of Malaysia, Labuan Financial Services Authority, and Malaysia Immigration Department are the relevant authorities in charge of the registration of international companies in Labuan. The business purposes need to be clearly stated in the company’s documents. It is important to know that the owners of an international company are not accepted without a clear criminal record which is normally verified by the Malaysian authorities.

The governing legislation in Malaysia mentions that an IBC owner needs to have a good reputation, be honest and reliable, and not dealwith business crimes in the past. The relevant authorities can make the verifications in this sense, and the governmental institutions agree on the provided documents for the international company in Labuan.

It is recommended to ask for information about how to open a company in Labuan as a foreign investor, especially IBCs. Even though such companies can be established with fewer formalities, it is suggested to ask for assistance from our team of company formation representatives in Labuan who can handle all the requirements for establishing a Labuan international company. Our experts can help both local and foreign entrepreneurs who are interested in developing their portfolios in Malaysia.

Foreign investors have to apply for a visa and if the conditions are satisfied, they will initially obtain a visa with a validity of 2 years, a period on time in which investors can relocate here with their spouse and children.

Characteristics of an SPV in Labuan

Special Purpose Vehicles (SPVs) in Labuan are legal entities established for specific purposes, often in the context of financial transactions or capital management for Labuan-based entities. In some cases, SPVs can serve as an alternative to IBCs in Labuan, depending on the specific needs and objectives of the entity establishing the corporate structure. Our specialists in company formation in Labuan will detail some of the characteristics of an SPV.

SPV companies established in Labuan must be domiciled in Malaysia and are subject to regulatory oversight by the Labuan FSA. Labuan SPVs must be controlled and managed by the Labuan bank for which they are established to facilitate capital issuance. The bank maintains oversight and responsibility for the SPV’s operations. Labuan SPVs should not have external creditors at any time.

Labuan banks must obtain written approval from the Labuan FSA before issuing regulatory capital through SPVs. This approval process involves submitting relevant documentation and ensuring compliance with the criteria for inclusion in the capital as set out by regulatory guidelines.

While International Business Companies in Labuan are more versatile and can engage in a wide range of business activities, an SPV is an interesting option investors can consider.

Statistics about Labuan companies

Regarding the subject of international business companies in Labuan, here are some statistics on the overall business environment in Labuan:

  • There were 4,847 operating businesses in Labuan in 2022;
  • In 2022, there was a significant increase of 17% in new incorporations compared to 2021, totaling 532 new companies;
  • A significant portion of the new incorporations (24%) originated from Asia and the Pacific region, accounting for approximately 350 new companies;
  • 61% of the new incorporations are related to financial business and professional services.

This shows that Labuan is a favorable location for investors seeking to establish operations, particularly in the financial sector.The availability of Labuan offshore companies as a viable business structure makes the jurisdiction even more appealing to interested individuals.

Investors who have further questions on the IBC in Labuan are invited to contact our team of company formation agents in Labuan for more details.