How to Set Up a Successful Business in Labuan: A Complete Guide

Labuan is an Asian offshore jurisdiction that comes with great opportunities for starting a successful business. Labuan is on the OECD’s white list, which means it follows the standards set by global regulatory bodies while keeping low tax rates for international companies.

From the Q Wealth article below, you will learn how to set up a thriving business in Malaysia (Labuan), how much it costs to register a company there, and what the latest compliance requirements are. If you need a personalized consultation, please feel free to contact Q Wealth experts or chat with us online.

Why Labuan is a great place for your business

Labuan, a small Malaysian jurisdiction, offers many benefits for successful entrepreneurs:

• Low corporate income tax rates up to 3%.
• Tax exemptions for investment holdings and non-trading companies.
• A vibrant international financial sector.
• Fast and easy business registration,
• High standards of privacy and confidentiality.
• A reputable jurisdiction that is on the OECD’s white list that avoids any sanctions or restrictions when dealing with other parties.
• A strong legal framework that protects investor assets and a simple tax system.
• Over 70 double taxation treaties with various states.
• A right to work in Malaysia for foreigners.
• Great potential for the development and expansion of international businesses. 

These advantages create unique opportunities for both international and local business owners. The latter can hire employees freely and obtain a 2-year multiple-entry visa for Labuan. To run their business, such entrepreneurs only need 1 director. Showing that their businesses have economic substance in Malaysia is another requirement.

Top business solutions for Labuan

Labuan offers various business niches for non-residents to qualify for the 3% or 0% tax rates. The above niches cover almost all kinds of services, administration, management, and charity. However, to be eligible for the reduced tax rate as a trading company, your business needs to trade globally within certain eligible sectors.

Take a look at some of the key business opportunities in Labuan for non-residents:

• import, export, and consultancy services
• investment ventures
• holding companies
• fundraising and philanthropic activities
• operating through limited liability partnerships and limited partnerships
• fintech activities (e-wallets, cryptocurrency trading on exchanges, blockchain solutions, and ICOs)
• private, public, and charitable foundations
• trusts
• financial services, insurance, factoring, leasing, and more.

Steps to start a successful business in Labuan 

To start a successful business in Labuan, consider several key factors, which Q Wealth experts can help you with:

• Choose a suitable company structure and business profile that comply with the tax and regulatory requirements of the jurisdiction.
• Register your company name by proposing 3 alternatives for similarity checks in the Registry. 
• Decide on the authorized capital amount you need.
• Select a bank to open a corporate account.
• Apply for 2-year multiple-entry work visas for yourself, your business partners, and family members. 

These are the documents you will need to set up a company in Malaysia (Labuan):

• your application
• Memorandum and Articles of Association
• declaration of compliance
• receipt confirming the payment of state duties and fees
• resolution appointing the company’s director
• passport details of the beneficial owner, shareholders, and directors. 

Here’s what you shall do to establish economic presence and follow corporate norms in Labuan:

• Keep a physical office in the jurisdiction.
• Appoint at least 1 director that can be either an individual or a legal entity.
• Have 1 to 50 shareholders of any nationality (individuals or legal entities).
• Hire a secretary who is a local resident.
• Avoid issuing bearer shares.
• Set a minimum authorized capital which can be as little as USD 1.
• Use any language with Latin alphabet characters for your company name.
• Hire resident employees:
  • 2 for a holding company
  • 3 for a trading company.

• Show annual expenses equal to or higher than the minimum required amount (which varies for each structure).
• Keep proper accounting records and documents in your office.

OTHER SERVICES IN LABUAN: Q WEALTH REPORT OFFERS

from 4500 EUR

Corporate Bank Account in Labuan, Malaysia: Remotely

from 4900 EUR

Remotely Register a Company in Labuan (Malaysia)

from 1400 EUR

Corporate Account in Labuan with Maybank: Remotely

How to choose the right company structure

Choosing the right business structure for your specific goals and objectives is very important when you register a local or international company in Labuan. The jurisdiction has many incorporation options to consider:

• Labuan Limited Company (LCS): This is a flexible structure for various commercial activities. With it, you can issue shares and manage your ownership and business with ease.
• Labuan Company Limited by Guarantee (LCG): The above legal form is mainly for non-commercial or charitable purposes. LCGs do not have any share capital, but they operate and have liabilities based on member guarantees.
• Labuan Limited Liability Limited Partnership (LLLP): This unique and adaptable structure combines the advantages of both partnerships and limited liability companies. It is a great choice for professional service providers like lawyers, accountants, and consultants.
• Labuan Funds and Trusts: The said entities allow foreign entrepreneurs to manage capital and real estate ventures, as well as engage in charitable endeavors. They are effective tools for preserving assets for individuals and families and making them easier to manage.
• Labuan International Trading Company (LITC): This is an international trading company that needs enough capital for its business operations and registration fees. It mainly trades commodities, including petroleum products, liquefied natural gas (LNG), minerals, agricultural products, processed goods, chemicals, minerals, and coal. LITCs pay a corporate income tax rate of 3% but no indirect taxes.

Before you start a company in Labuan, seek expert guidance from Q Wealth to select the best business form that meets your needs. 

Understanding the tax system in Labuan

The tax system for both local and foreign companies in Labuan changed significantly in 2019. These are the rules that apply at present:

• Offshore entities pay a corporate tax rate of up to 3%. 
• Non-trading businesses and holding companies do not pay any corporate tax. 
• The local corporate tax rate makes 24%. Here’s when foreign companies pay as much in business taxes:
  • They do not meet at least one economic substance requirement, like having an office, hiring local staff, making financial transactions, reporting their activities, etc. 
  • They do business in Labuan that earns income and profits for such foreign companies.
  • They receive income from intellectual property and licensed activities, e.g., financial services, insurance, etc.
• Money brokers pay a 3% tax rate if they meet Economic Substance Requirements (ESR), have at least 2 local employees, and spend at least MYR 100,000 (about USD 25,000) per year in Labuan. Otherwise, they pay a 24% tax rate.

FYI: Labuan has signed about 70 agreements with different countries to avoid double taxation. This reduces the tax burden for companies, even if they are or become residents of Malaysia.

How to register a business in Labuan remotely

1. Send us a service request for offshore company registration in Labuan to in**@***********rt.com.
2. Fill out the application form.
3. Prepare the required documents and send them to Q Wealth experts. 
4. If you wish, choose additional services that suit your needs before you pay for the ordered services in full.
5. Receive your corporate documents, either in person or via a courier service, and start an offshore business in Labuan.