Executive Summary
The Malaysian Federal Territory of Labuan is widely known for being an offshore financial centre. Labuan’s total area covers 92 sq km. Its official language is Bahasa Malaysia, but English is widely known and used on its territory.

The administration of Labuan passed to the government of Malaysia in 1984. The federal government is responsible for the defense, local police maintains everyday order. Mining sector, mainly oil and gas production makes the biggest part of contributions to the state economy. Other developed market segments are represented by manufacturing, wholesale and retail, hotels and restaurants businesses.

The Malaysian Ringgit (MYR) is used on the territory of Labuan.

Labuan consists of Labuan Island and six smaller islands. Bandar Labuan is the biggest city and port of Labuan. Facing the South China Sea, Labuan lies close to Malaysian state of Sabah and Brunei Darussalam. Labuan has a flat landscape with the highest point reaching 85 metres. More than 70% of its territory is covered with plants.

Labuan is a safe and important harbor, and in translation from Malay its name means “Anchorage”. It has a tropical climate with minimum temperature changes, which all over the year ranges from 24 degreed C to 34 degrees C.

Map, Flag and Coat of Arm

Types of Company

Private Company Limited by Shares

A number of this company’s shareholders cannot exceed 50, and its shares may not be offered to a general public. Such a company may achieve an exempt status if its shares are not directly or indirectly owned by any corporation and if it has no more than 20 members. In such a case, a company does not have to submit a number of annual financial statements.

Private unlimited companies are also permitted.

Company Limited by Guarantee
This type of company is often used for non-profit and charitable purposes.

Public Company Limited by Shares
Such a company may be listed on a stock exchange and its shares may be offered to the general public. It must obtain a certificate stating its status as a public company.

Foreign Company
This type of company is a foreign entity incorporated outside Malaysia, which conduct business on the territory of Malaysia. It must submit a number of requested documents, plus audited financial statements in order to be registered in Labuan.

Branch of a Foreign Company
When required documents are submitted with the authorities and a name of a company branch is approved, at least one person resident in Malaysia should be appointed as a local agent of the Branch of a local company. A registration fee is payable which varies in accordance with the amount of the authorized capital and is equivalent to the registration fees of local companies.

Offshore Company
A private company limited by shares or guarantee can be registered as an offshore company. Having obtained an offshore company status, it enjoys a particular tax treatment regime. A local licensed trust company is an obligatory requirement to take part in an offshore company’s registration and management activities, providing a registered office, corporate secretary services and filing the necessary documentation with local authorities.

Such a company can be established by a resident or non-resident of Malaysia and it may conduct any lawful business. Banking, insurance, fund management and some other types of business activities require a special license. It is not allowed to conduct a shipping business.

At least one director is an obligatory requirement; different share classes are allowed, except bearer shares. Beneficial owners need not be disclosed, one share is the minimum issued capital, annual returns must be filed, and specific accounting records must be kept in Labuan.

Offshore Limited Partnership
At least one general and one limited partner can form a limited partnership; there is a limitation up to 20 partners within one partnership. Generally, this structure is used for professional business purposes such as accounting, engineering, law and other spheres.

Usually a trust has perpetuity up to 100 years and can be created by a will, including a declaration of trust or any other written document. A Labuan trust can be relatively easily redomiciled to another jurisdiction, as well as foreign trusts may transfer their domicile from abroad to Labuan. Offshore trusts enjoy a particularly favourable tax treatment being liable to pay 3% on their net profits.


Being a part of Malaysia personal taxation and tax liability is based on principles applicable in Malaysia. Residents of Malaysia are liable to pay income tax on worldwide income, while non-residents pay taxes only on income derived from activities conducted within the country. Those individuals are considered residents for tax purposes who are physically present in Malaysia for at least 182 days, or if they were present in Malaysia at least 90 days three of the past four consecutive years, or if they were resident there in the past three years and will also be residents in Malaysia in the following year.

Income tax has a progressive nature, reaching the maximum of 28%. There are no social security contributions as such, but employees are obliged to pay a certain percent from the wage to Employees’ Provident Fund (EPF) on a monthly basis. Income derived from dividends received by or from an offshore company, distributions from an offshore trust, royalties received by a non-resident and certain other types of income are not taxed.

There are no capital gains taxes apart from profit derived from real property, which is held for less than five years. Corporation tax is the main direct tax applicable on non-exempt companies. A standard rate of corporation tax is 28%.

Such indirect taxes as sales tax, service tax, custom duties and stamp duties are levied.

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