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The Provisions of Labuan Business Activity Tax Act

The Provisions of Labuan Business Activity Tax Act

The legislation that oversees the tax payments of companies with activities in Labuan can be explained by our team of company formation agents in Labuan for foreigners who want to start a business in this jurisdiction. Having a complete idea about Labuan Business Activity Tax Act 1990 before establishing a company in Malaysia enters our concern because we are at the disposal of foreign investors with assistance and information.

Who needs to pay taxes in Labuan?

Any entity carrying on activities in Labuan is subject to specific taxes, in agreement with the Labuan Business Activity Tax Act and its provisions. With respect to the Income Tax Act 1967 and the business activity, the company profits registered in a year or subsequent basis period are taxable. Trading companies in Labuan are subject to a 3% corporate income tax. As for the non-trading companies in Labuan, these are exempt from such taxation. Opening a company in Malaysia, including in Labuan, an important offshore destination can be assisted by our company incorporation specialists in Labuan who can handle the requirements in this sense.

What companies are exempt from taxation in Labuan?

According to Labuan Business Activity Tax Act 1990, 65% of the statutory revenues registered by companies with financial or accounting services is exempt from the income tax from the year of calculation. Also, the fees received by foreign individuals who are directors in a Labuan company are not subject to taxation. The same is available for managers of a company in Labuan, the only thing changing is the gross employment income percentage which is set at 50.

What you need to know about the corporate tax structure in Labuan

The taxes imposed on the profits registered by companies in Labuan should be in the attention of any entrepreneur, whether from Malaysia or from abroad. The following tax information needs to be observed at the time an investor decides for business in Malaysia, including Labuan, an important offshore jurisdiction:

  • • the financial year in Malaysia ends every year on December 31st;
  • • the tax filing for companies in Labuan must be completed until the last day of March of the following year;
  • • the yearly tax submission with the Inland Revenue Board in Malaysia is mandatory and can be assisted by our team;
  • • the corporate income tax of 3% is applicable once an audit takes place.

Feel free to get in touch with our company formation representatives in Labuan and find out more about the provisions of Labuan Business Activity Tax Act.

You can also contact our specialists if you need information on the provisions of the Labuan Companies Act 1990. This law regulates the activity of certain company types, including the Labuan offshore.

The companies set up here benefit from various tax exemptions or deductions, for instance, the corporate income tax is charged at a rate of only 3% (applied on the company’s net profits).