doing business in labuan - ty teoh international

DOING BUSINESS IN LABUAN 04/2019

tyteoh.com.sg

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SINGAPORE l MALAYSIA I LABUAN I MYANMAR I CAMBODIA

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About Labuan

Summary of Quick Facts

Location 8km off the coast from the state of Sabah, East Malaysia, on the island of Borneo.

Land Area 92 sq. km. Time Zone GMT + 8 Hours. Climate Tropical weather with an average 30℃.

Population 95,500 comprising of a mix of Malays (50%),Chinese

(40%), Indians and the indigenous people of Sabah & Sarawak, East Malaysia.

Language Malay is the national language but English is commonly spoken. Currency Malaysian Ringgit (MYR). Legal System English Common law, British Legal System. Constitution Parliamentary democracy. Economic Sector Oil and Gas, Business and Financial Services. Accessibility Several daily flights to Kuala Lumpur and Kota Kinabalu with connection to USA, Europe, Asia and Australia.

Labuan Companies

Businesses in Labuan are regulated by modern Acts. These Acts enhance its competitiveness in the offering of financial product and services.

Labuan IBFC also adheres to international standards and best practices including anti money laundering and exchange information set by the

Organisation of Economic Cooperation and Development. Acts which govern the businesses in Labuan as follows:-

a. Labuan Business Activity Tax Act 1990 (“LBATA”)

b. Amendment to the Labuan Business Activity Tax Act (Finance Bill 2018)

c. Labuan Companies Act 1990

d. Labuan Trusts Act 1996

e. Labuan Financial Services Authority Act 1996

f. Labuan Financial Services and Securities Act 2010

g. Labuan Islamic Financial Services and Securities Act 2010

h. Labuan Foundation Act 2010

i. Labuan Limited Partnerships and Limited Liability partnerships Act 2010

Labuan companies can trade in any currencies with any countries.

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Labuan Companies Characteristics

Company Name I. Under the Labuan Companies Act 1990, the name of the company may have the word “ (L) “ as part of its name and shall also have the

word:

a) “Bhd” or “Berhad”, where the company name shall in addition have the word “(L)” or “(Labuan)”;

b) “Corporation” or “Corp”;

c) “Incorporated” or “Inc”;

d) “Limited” or “Ltd”;

e) “Public Limited Company” or “PLC”;

f) “Societe Anonyme” or “Sociedad Anonima” or “S.A”;

g) “Aktiengesellschaft” or the abbreviation “A.G”;

h) “Naamloze Vennootscap” or the abbreviation “N.V”;

i) “Perseroan Terbatas” or the abbreviation “P.T”.

II. The words “Royal”, “Bank”, “Finance”, “Fund” or “Trust” shall be avoided, except for specific business activities which required the

corresponding licence(s).

Share Capital

a. Share capital can be held in any currencies.

b. No par value and treasury shares are allowed.

Shareholder At least one (1) shareholder who can be either individual or corporate.

Director(s)

a. At least one (1) Director who can be either individual or corporate.

b. The Director(s) can be either a non-resident or resident of Malaysia.

Company Secretary The company must have a resident secretary which can be either individual or corporate.

Registered Office The company must have a registered office in Labuan.

Annual Return An annual must be filed not later than 30 days from the anniversary of the date of its incorporation.

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Maintain Proper Accounting Records Yes.

Audit The Labuan company is subject to audit.

Tax Return Tax return must be filed within a periods of three (3) months.

Business Registration An annual government fee is payable within 30 days immediate after the anniversary date of its incorporation.

Labuan Taxable Activities

Taxation With effect from 1 Jan 2019, under Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulation 2018, a Labuan company carrying on a Labuan business activity is only subject to tax at the rate of 3% of net profit PROVIDED that it has fulfilled the requirement of the number of full time employees and an amount of annual operating expenditures as specified in the Schedule below:

Labuan Company Carrying on a Labuan Business Activity

Minimum Number of Full

Time Employees in Labuan

Minimum Amount of Annual Operating

Expenditure in Labuan

1. Labuan Insurer, Labuan reinsurer, Labuan takaful operator or Labuan retakaful operator

4 150,000

2. Labuan underwriting manager or Labuan underwriting takaful manager 4 100,000

3. Labuan insurance manager or Labuan takaful manager 4 100,000

4. Labuan insurance broker or Labuan takaful broker 4 100,000

5. Labuan captive insurer or Labuan captive takaful 4 100,000

6. Labuan International Commodity Trading Company 3 3,000,000

7. Labuan bank, Labuan investment bank, Labuan Islamic bank or Labuan Islamic investment bank

3 180,000

8. Labuan trust company 3 120,000

9. Labuan leasing company or Labuan Islamic leasing company

2 100,000

10. Labuan credit token company or Labuan Islamic credit token company

2 100,000

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11. Labuan development finance company or Labuan Islamic development finance company

2 100,000

12. Labuan building credit company or Labuan Islamic factoring company

2 100,000

13. Labuan factoring company or Labuan Islamic factoring company

2 100,000

14. Labuan money broker or Labuan Islamic factoring company 2 100,000

15. Labuan fund manager 2 100,000

16. Labuan securities licensee or Labuan Islamic securities license

2 100,000

17. Labuan fund administrator 2 100,000

18. Labuan company management 2 100,000

19. Labuan International Financial Exchange 2 120,000

20. Self-regulatory organisation or Islamic self-regulation organisation 2 120,000

21. Holding company 2 50,000

Income derived from intellectual property rights is subject to tax at the rate of 24% under the Income Tax Acts (“ITA”). With effect from 1 Jan 2019, under Income Tax (Deductions Not Allowed for Payment Made to Labuan Company by Resident) Rules 2018, the following type of payments made to a Labuan company by a company resident in Malaysia are not entitled to a tax deduction:

Type of payment Amount not allowed for deduction

1. Interest payment 33%

2. Lease rental 33%

3. Other payments 97%

Tax Exemption

The source of income is exempted from income tax as follows:- a. Dividend paid out of the income derived from the Labuan Business Activities is not subject to tax.

b. Interest or technical and management fee paid by a Labuan company to a non-resident person or a resident person or another Labuan

company is not subject to withholding tax.

Tax Incentives (until to Year of Assessment 2020)

a. Tax exemption on Director fees received by a non-citizen individual in his capacity as a Director of a Labuan company.

b. Tax exemption on 50% of gross income received by a non-citizen individual from exercising employment in Labuan with Labuan company in

managerial function in Labuan or at its marketing or co-located offices approved by Labuan Financial Services Authority.

c. Tax exemption on 50% of gross housing and Labuan territory allowances received by Malaysian citizen from exercising employment in Labuan with a Labuan company.

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Stamp Duty Exemption

The following activities are exempted from stamp duty:- a. All Memorandum and Articles of Association of a Labuan company.

b. All instrument executed by a Labuan company in connection with a Labuan business activities, including transfer of shares in a Labuan

company.

Double Taxation Agreements Malaysia has entered into Double Taxation Agreements with various countries as follows:-

Albania, Republic Germany Mongolia South Africa

Argentina ^ Hong Kong Morocco Spain

Australia Hungary Myanmar Slovak Republic

Austria India Namibia Sri Lanka

Bahrain Indonesia Netherlands Sudan

Bangladesh Ireland New Zealand Sweden

Belgium Islamic Republic of Iran Norway Switzerland

Bosnia & Herzegovina * Italy Pakistan Syria

Brunei Japan Papua New Guinea Taiwan #

Canada Jordan Philippines Thailand

Chile Kazakhstan Poland Turkey

China, People’s Republic Korea, Republic Qatar Turkmenistan

Croatia Kuwait Romania United Arab Emirates

Czech Republic Kyrgyz, Republic Russia United Kingdom

Denmark Laos San Marino United States of America ^

Egypt Lebanon Saudi Arabia Uzbekistan

Fiji Luxemburg Senegal * Venezuela

Finland Malta Seychelles Vietnam

France Mauritius Singapore Zimbabwe*

* Gazette Double Taxation Agreements. ^ Limited Agreements. # Income Tax Exemption Order

Currently, Labuan has been specifically excluded from Double Taxation Agreement with the countries as follows:-

Australia Japan South Africa Seychelles

Chile Luxembourg Spain United Kingdom

Indonesia Netherlands Sweden Copy Rights @ TY TEOH International. This publication contains information in summary form and is therefore intended for general guidance only. No person should rely on the contents of the aforesaid publication without first obtaining advice from a qualified professional person. TY TEOH International is not responsible for the results of any actions taken on the basis of information neither in this publication, nor for any error in or omission from this publication. TY TEOH International expressly disclaims all and any liability and responsibility to any person, whether a reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication.

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WHAT WE OFFER

What sets us apart is a deep knowledge of a variety of industrial sectors, and the expertise and ability to develop tailored solutions for our

clients operating within these industrial sectors.

Audit & Assurance BPO & Business Advisory Cambodia Advisory China Desk Financial & Transaction Advisory

Migration Advisory Myanmar Advisory Offshore Advisory Profit Improvement Risk & Governance Advisory

Sustainability Advisory Tax & GST Advisory Transfer Pricing Advisory Valuation Advisory

WHY TY TEOH International TY TEOH International is a leading regional chartered accountants, tax, transfer pricing, valuation and consulting firm with office presences

in Singapore, Malaysia, Myanmar and Cambodia to provide a diverse spectrum of business solutions and consulting services to public listed

companies, Fortune 500 companies, multi-national corporations, local small and medium companies representing a cross section of major

industries.

Registered Auditor of Public Company Accounting Oversight Board (PCAOB), USA

Registered Auditor with Accounting and Corporate Regulatory Authority (ACRA), Singapore

Approved Auditor of Labuan Financial Services Authority (Labuan FSA), Malaysia

Member firm of SFAI, Top 20 International

accounting network and association. www.santafe-associates.com Member firm of Quantera Global, the

world’s leading, independent and global transfer pricing advisory firms.

www.quanteraglobal.com

Joint Venture Partner of GCA, the valuation

specialist in assets, business and financial instruments. www.gctyteoh.com

Want to know about TY TEOH International?

Visit our website www.tyteoh.com.sg

MALAYSIA

MYANMAR

LABUAN

COMBODIA

OFFICE LOCATIONS

SINGAPORE

Mr T L TEOH, Executive Director

E [email protected]

Singapore +65 682 00089

Kuala Lumpur +603 780 55022 Labuan +6087 599 328 Ipoh +605 546 3388

Johor Bahru +607 595 2299 Muar +606 952 0205

Penang +604 371 3419 Sitiawan +605 688 5112

Myanmar

Yangon +95 9978 100 900

mailto:[email protected]

About TY TEOH INTERNATIONAL TY TEOH International is a leading regional chartered accountants, tax, transfer pricing, valuation and consulting group with office presences in Singapore, Malaysia, Myanmar and Cambodia to provide a diverse spectrum of business solutions and consulting services to the corporate client including Audit & Assurance, BPO & Business Advisory, Cambodia Advisory, China Desk, Financial & Transaction Advisory, Migration Advisory, Myanmar Advisory, Offshore Advisory, Profit Improvement, Risk & Governance Advisory, Sustainability Advisory, Tax & GST Advisory, Transfer Pricing Advisory and Valuation Advisory. Member firm of Santa Fe Associates International (SFAI);

Registered Auditor of Public Company Accounting Oversight Board

(PCAOB), USA;

Registered Auditor with Accounting and Corporate Regulatory Authority (ACRA), Singapore;

Approved Auditor of Labuan Financial Services Authority (Labuan FSA),

Malaysia; Member of Quantera Global, transfer pricing specialist.

SINGAPORE

151 Chin Swee Road, #01-40 Manhattan House, Singapore 169876

T +65 682 00089

MALAYSIA Kuala Lumpur Level 4, Wisma TY TEOH, 11 Jln PJU 1A/41B, NZX Commercial Centre, Ara Jaya, 47301 Petaling Jaya, Selangor. T +603 780 55022

Johor Bahru

Level 2, 6 Jalan Mutiara 1/1, Taman Mutiara Mas, 81300 Skudai, J.B., Johor.

T +607 595 2299

Penang Level 18, Unit A1, Gurney Tower, 18 Persiaran Gurney 10250, Penang. T +604 371 3419 (Audit) Level 16, Unit A, Gurney Tower, 18 Persiaran Gurney 10250, Penang. T +604 371 3318 (Tax)

Labuan Level 14 (B), Main Office Tower, Financial Park Labuan Complex, Jalan Merdeka, Federal Territory of Labuan, 87000 Labuan. T +6087 599 328 Muar Ground Floor, No. 118-4, Jln Salleh, 84000 Muar, Johor. T +606 952 0205

Sitiawan

160A, Taman Desa Bintang II, Jln Lumut, 32000 Sitiawan, Perak.

T +605 692 7112

Ipoh

16A, Jalan Medan Ipoh 6, Bandar Baru Medan, 31400 Ipoh, Perak. T +605 546 3388

MYANMAR

Yangon Level 10-01 Sule Square, 221 Sule Pagoda Road, Kyauktada Township, Yangon, Myanmar. T +95 9978 100 900

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