Labuan Company Registration: A Step-by-Step Guide

This article aims to provide a comprehensive guide for businesses planning to register a company in Labuan, covering the registration process, compliance requirements, and operational considerations. By offering an in-depth analysis of Labuan’s unique business advantages, we aim to equip businesses with key information to ensure efficient registration and smooth operations.

Advantages of Registering a Company in Labuan

Tax Incentives
Labuan offers highly attractive tax policies, with a corporate tax rate as low as 3% for trading companies, and a full tax exemption for non-trading companies (such as investment holding companies). This tax benefit makes Labuan highly competitive internationally, especially for multinational companies seeking to optimize tax costs. Additionally, companies can opt for a fixed tax model, which simplifies the tax filing process and reduces compliance costs further.

100% Foreign Ownership
Unlike many countries that impose restrictions on foreign ownership, Labuan allows companies to be fully owned by foreign investors without the need for local shareholders. This flexible policy is especially crucial for investors who wish to maintain complete control of their businesses in international markets.

Flexible Company Structure
Labuan’s legal framework allows companies to tailor their structures based on specific needs. Businesses can choose between Limited Liability Companies (LLC), International Business Companies (IBC), or other specific business entity types. This flexibility not only supports businesses’ commercial needs but also provides ample room for future expansion.

Economic Substance Requirements
Labuan’s economic substance requirements are relatively lenient, such as the minimum number of local employees and operational expenditure. By hiring just one local employee and meeting certain annual expenditure thresholds, businesses can easily comply with these requirements. This pragmatic policy helps businesses maintain flexibility while keeping costs under control during the compliance process.

Basic Requirements for Company Registration

Director and Shareholder Requirements

• Minimum Number: The company needs at least one director and one shareholder, who can be the same individual and of any nationality.
• Qualification: The director must be at least 18 years old and have a good legal standing. Shareholders can be either individuals or corporate entities.
• Flexibility: The company allows full foreign ownership, with no requirement for local residents to participate, further enhancing business autonomy.

最低资本要求

• Minimum Capital: The minimum capital requirement for a Labuan company is 1 Malaysian Ringgit, making it favorable for startups and small-to-medium enterprises by lowering the entry barriers.
• Capital Flexibility: Businesses are not required to pay the full capital upfront, and the amount can be set based on the company’s commercial needs, providing greater financial flexibility for initial operations.

Local Secretary and Registered Address

• Company Secretary: All Labuan companies must appoint a qualified local company secretary responsible for document submissions and communication with regulatory authorities.
• Registered Address: The company must have a local registered office address in Labuan to comply with the Labuan Financial Services Authority (Labuan FSA) regulations. This address is usually provided by service providers or trust companies.

Detailed Registration Process

1. Determine Business Structure

• Choose Company Type: Based on business goals, select the appropriate company type.
  • Trading Company: Suitable for international trade, banking, insurance, etc.
  • Non-trading Company: Focuses on investment holding, asset management, etc., and enjoys tax exemptions.
• Consult Professional Advice: Fionza’s professional consultants will assess your business needs and recommend the best business structure, ensuring compliance with Labuan’s legal and tax regulations.

2. Reserve Company Name

• Name Approval: The company name must be approved by the Labuan Financial Services Authority (Labuan FSA) to ensure it is unique and compliant with local regulations.
• Reservation Process: After submitting the name approval application, approval is typically received within 24 hours. The approved name is reserved for 3 months.

3. Prepare Required Documents

• KYC Documents: Identity documents of the company’s directors and shareholders (passport copies), proof of address (e.g., utility bills), and a business plan.
• Company’s Constitution: Depending on the business type, the company’s Memorandum and Articles of Association must be prepared.
• Other Documents: Including shareholder agreements and capital declaration.

4. Submit Registration Application

• Registration Steps: Submit all prepared documents to the Labuan Financial Services Authority.
• Fees: Pay the registration fees.
• Estimated Time: If the documents are complete and meet the requirements, the registration process can be completed within 24 hours.

5. Open Bank Account

• Account Types:
  • Local Bank Account: Convenient for handling business transactions within Malaysia.
  • International Bank Account: Suitable for businesses needing global financial operations.
• Application Requirements: Submit registration documents, KYC documents, and business proof.
• Process Time: Account setup usually takes about 4 weeks. If an interview is required by the bank, Fionza can assist with remote video conferencing or in-person support.

Post-Registration Compliance and Maintenance

Annual Financial Statements and Tax Filing

• Financial Statements: All Labuan-registered companies must prepare and submit annual financial statements in compliance with the Malaysian Companies Act 2016.
• Submission Deadline: The first financial statement must be submitted within 18 months of incorporation, and thereafter, within 6 months after the end of each fiscal year.
• Penalties: Companies failing to submit on time may face penalties up to RM500,000 or other legal consequences.
• Tax Filing: Companies must file income tax returns in accordance with the Labuan Business Activity Tax Act.
  • Tax Rates: Trading companies are subject to a 3% tax rate, while non-trading companies enjoy tax exemption.

Audit Exemption Eligibility

• Exemption Criteria: Certain types of companies may apply for audit exemption, including:
  • Dormant Companies: No business transactions for the year.
  • Low-Income Companies: Zero income and assets under RM300,000 in the last two years.
• Application Process: Submit proof documents to the Labuan Financial Services Authority. Fionza will assist in preparing the required materials and completing the application.

Economic Substance Compliance

• Requirements:
  • Local Employees: Trading companies must hire at least two local employees; non-trading companies need one employee (if they have income).
  • Office Setup: A local office address in Labuan must be provided.
  • Minimum Expenditure: Trading companies must meet an annual minimum operational expenditure of RM50,000, while non-trading companies must meet RM20,000.

Labuan, with its favorable tax policies, flexible legal framework, and strategic international position, is an ideal choice for businesses seeking to expand globally. Whether engaged in international trade, financial services, or asset management, Labuan companies offer significant tax optimization and operational advantages.

With Fionza’s professional services, businesses can efficiently complete company registration, comply with ongoing requirements, and fully capitalize on Labuan’s status as a global business hub. We offer comprehensive solutions, from company registration to post-registration maintenance, helping businesses achieve success on the international stage.