Labuan (Malaysia)

Company Formation in Labuan (Malaysia)

Labuan (Malaysia)

Formation Time

3–5 business days

Min. Capital

USD 1

Corporate Tax

3% of audited net profit (0% for pure holding)

Foreign Ownership

100%

Overview

Labuan International Business and Financial Centre (Labuan IBFC) is Malaysia's premier mid-shore special jurisdiction, established under federal legislation to provide world-class tax efficiency within a robust common-law legal environment. Governed by the Labuan Financial Services Authority (Labuan FSA), a Labuan company offers an attractive 3% corporate tax rate on audited net profits for trading entities, and 0% corporate tax for pure equity holding companies. Crucially, Labuan companies can access Malaysia's extensive network of 75+ double taxation agreements, while enjoying 0% withholding tax on outbound dividends, royalties, and interest. Non-citizen directors enjoy a 100% exemption on director fees, and foreign professionals qualify for a 50% income tax exemption. With a fast 3–5 day incorporation process, 100% foreign ownership, and renewable 2-year business employment visas, Labuan is the premier mid-shore gateway for international trading, wealth structuring, fintech, and digital assets in Southeast Asia.

3% corporate tax rate

0% holding company tax

75 tax treaties access

0% withholding tax

2-year business visa

Why Choose Labuan (Malaysia)

3% flat corporate tax on audited net trading profits

0% corporate tax on non-trading / pure holding activities

Access to Malaysia's 75+ double tax agreements (subject to treaty conditions)

0% withholding tax on dividends, royalties, and interest paid to non-residents

0% personal tax on director fees for non-citizen directors

100% foreign ownership with USD 1 minimum capital

2-year renewable Labuan Employment Visa for owners and family members

Fully regulated by Labuan FSA under English common law principles

Business Entity Types

Entity	Ownership	Directors	Capital	Tax	Best For
Labuan Trading Company	100%	1 (individual or corporate)	USD 1	3% on audited net profits (must meet local substance requirements)	International trading, consulting, software licensing, global commerce
Labuan Holding Company	100%	1	USD 1	0% corporate tax on qualifying passive dividend & capital income	Holding equities, intellectual property, real estate portfolios
Labuan Special Purpose Vehicle (SPV)	100%	1	USD 1	3% or 0% depending on asset class	Securitisation, aircraft leasing, structured finance
Labuan Protected Cell Company (PCC)	100%	1+	USD 1 per cell	3% on trading cells / 0% on holding cells	Captive insurance, multi-strategy fund structuring, family office silos

Step-by-Step Formation Process

Name Clearance & KYC

1–2 days

Submit proposed corporate names and complete AML/CFT vetting with Labuan FSA licensed trust officer.

Filing with Labuan FSA

2–3 days

Lodge Memorandum and Articles of Association and statutory declarations with Labuan Financial Services Authority.

Certificate of Incorporation

1 day

Receive official Certificate of Incorporation from Labuan FSA.

Bank Account Opening

2–4 weeks

Open multi-currency corporate bank account with an onshore Malaysian or international bank.

Labuan Work Visa (Optional)

3–6 weeks

Apply for 2-year Labuan business residency visa with immigration authorities.

Costs & Fees

Government / License Fee	USD 1,000+
Our Service Fee	USD 2,500+
Annual Renewal	USD 2,000+

Fees are indicative and may vary based on business activity, entity type, and additional approvals required. Contact us for a precise custom quote.

Get Custom Quote

Banking

Labuan companies can open accounts with commercial banks in mainland Malaysia (Kuala Lumpur, Penang) as well as Labuan-licensed offshore investment banks. Major institutions like Maybank, CIMB, RHB, and OCBC frequently handle Labuan multi-currency corporate accounts.

Account Opening Time

2–4 weeks

Multi-Currency

Yes — multiple currencies supported

Recommended Banks

MaybankCIMB BankRHB BankUOB MalaysiaStandard Chartered MalaysiaAffin Bank

Tax Overview

Corporate Tax

3% of audited net profit for trading activities; 0% for pure holding activities

Personal Income Tax

0% on director fees for non-Malaysian directors; 50% exemption on expatriate professional income

VAT / Sales Tax

0% (exempt from Malaysian Sales and Service Tax)

Capital Gains Tax

0% — no capital gains tax on share disposal

Withholding Tax

0% on outbound dividends, interest, and royalties

Double Tax Treaties

75 countries

Economic substance requirements must be satisfied (typically 1–2 full-time employees in Labuan and RM 50,000–100,000 annual operational spend) to qualify for the 3% rate; non-compliant entities are taxed at 24% under ITA Section 3B.

Visa & Residency

Labuan Employment Visa

2 years (multiple entry, renewable indefinitely)

For directors, shareholders, and expatriate executives of Labuan entities

Dependent Pass

Aligned with principal visa

Covers spouse, children under 21, and dependent parents

Family visa: AvailableProcessing: 3–6 weeks

Frequently Asked Questions

How does the 3% tax rate work in Labuan?

Under the Labuan Business Activity Tax Act (LBATA), a Labuan entity carrying on trading activities pays a flat 3% tax on audited net trading profits, provided it satisfies the relevant economic substance requirements (such as maintaining a local office, employing local staff, and incurring specified annual operating expenditure in Labuan). If substance requirements are not met, the company is taxed under the standard Malaysian Income Tax Act at 24%.

What is the tax rate for a Labuan holding company?

A Labuan company that acts purely as a holding vehicle (holding investments in securities, equities, or real estate) pays 0% corporate tax on its qualifying holding income, provided it meets the minimal substance requirement of maintaining an annual operating expenditure in Labuan (typically RM 20,000).

Can a Labuan company do business with Malaysian residents?

Yes, recent regulatory updates permit Labuan companies to transact with Malaysian residents and in Malaysian Ringgit, provided proper tax disclosures and notifications are made to the authorities.