Malaysia (Labuan) – Why and for Whom? 2023-06-27T11:41:01+00:00

Malaysia (Labuan) – Why and for Whom?



Why? The key benefit of selecting Labuan as a corporate base is that it benefits from a very favorable tax regime whereby either a company can be taxed on the basis of a tax rate of only 3% (which also requires the submission of annual audited accounts) or pay a flat rate tax of 20,000 Ringgit (Approximately €4,125.00) per annum and which doesn’t require the submission of annual audited accounts. However, the most important tax planning benefit of Labuan is that it is considered a part of the Malaysian tax system for tax treaty purposes, which means that despite the very beneficial tax regimes, it can* fully-benefit from the extensive tax treaty network Malaysia has with over 60 countries worldwide.

* It should be noted that both Switzerland and the Netherlands exclude Labuan from their key tax treaty provisions but much more importantly China and all other East Asian countries do not.

Tax Planning Benefits

  • No corporate taxes for ‘passive’ trading companies: No tax is imposed on the income of offshore companies in Labuan which are non-trading companies carrying on offshore non-trading activities such as the holding of shares, immovable property (i.e. a house or office), taking loans and/or placing deposits. Non-trading companies must maintain proper company books and accounts but do not need to have their accounts audited;
  • Internationally Trading need pay only 3% corporate tax or a flat rate tax of 20,000 Ringgit: Where companies are trading outside of Labuan they will be subject to a tax rate of 3% on their world-wide profits or a maximum annual payment of approximately €4,125.00 depending on the fiscal election. The accounts of trading companies must not only be properly maintained but are also subject to an annual audit;
  • Tax Treaties are inclusive: With the exception of Switzerland and the Netherlands both trading and non-trading companies may benefit from Malaysia’s 60 plus double taxation treaties either directly or by using domestic company conduits;
  • No withholding taxes – There are no withholding taxes on dividends paid by Labuan offshore trading or non-trading companies;
  • No inheritance, death or estate taxes – There is no inheritance, death or estate taxes;
  • Tax concessions for foreign workers – Foreign employees of Labuan offshore companies can enjoy a series of personal tax concessions whilst resident in Labuan including up to a 50% discount on the custom and excise duty payable for personal vehicles;
  • Confidentiality guaranteed by law – Confidentiality is guaranteed under the Offshore Companies Act 1990 and the disclosure of information is strictly prohibited unless pursuant to a court order;
  • No minimum capital requirements – There are no minimum capital requirements unless a company is acting as a bank, insurance company or fund manager;
  • Public share issues permitted – The issue of shares and debentures to the public is allowed subject to the approval of Labuan Offshore Financial Services Authority (LOFSA);
  • No director/shareholder restrictions – There are no nationality restrictions for either directors or shareholders;
  • Corporate directors permitted – Directors and shareholders can be corporate bodies;
  • Multi-denominational share capital – Shares can be denominated in any currency save the Malaysian Ringgit;
  • Different share classes available – Shares of different classes are allowed;
  • Annual General Meetings (AGM’s) – Company AGM’s may be held outside of Malaysia and, if required, by electronic method;
  • International banks located in Labuan – There is a comprehensive range of international and local banks available in Labuan;
  • Well educated professionals – Labuan has well educated professionals mostly educated at UK universities;
  • English is the business language – English is the dominant language in commerce throughout Labuan;

The legal system is mostly common law based – For business purposes, the Malaysian legal system is mostly common law based but Sharia law also applies in certain circumstances normally in respect to personal matters where Muslims are involved.

Double Taxation Treaty Network

The Malaysian double taxation treaty network is one of the largest in south-east Asia and Labuan (with the exceptions of the Netherlands and Switzerland) has become in particular a favored business location especially for those wishing to benefit from the Malaysian/Chinese tax treaty provisions.

For Whom? Malaysian Labuan companies are extremely attractive for those with business either in China or South East Asia in general especially given the ability to avoid accountancy submissions whilst also benefit from Malaysia’s extensive tax treaty network.


(Strictly Confidential No Obligation)

    SCF Legal & Corporate Management Services Limited

    Address: 250 Kings Road, Chelsea, London SW3 5UE

    Telephone: 020 7731 2020   Email:

    Registration number: 05462416



    The SCF International  specializes in providing accountancy and management services for UK and Irish limited companies, UK & Irish company management services including the provision of (where necessary) domestic directors, domestic company secretaries, registered office address services, trading offices, value added tax (VAT) registration and management, payroll (Pay as You Earn PAYE), opening up and managing UK or Irish bank account facilities, raising  invoices and any and/or all other services required to establish a bone fide managed and controlled UK or Irish limited liability company.

    Our in-house team of legally and accountancy qualified experts can also provide advice on current UK & Irish tax laws/provisions including anti-avoidance provisions, EU directives and regulations, the impact of BREXIT for both UK and EU based businesses and other relevant. In addition, where required the SCF Group can also set-up and arrange the management of companies in tax efficient EU based jurisdictions such as Cyprus, Luxembourg or Malta or indeed any jurisdiction in the world including those in the Middle and Far East.

    Property de-enveloping services – In conjunction with leading UK firms of solicitors SCF can help transfer companies currently held by what were known as ‘offshore’ companies into either more tax efficient UK companies or directly back into the names of individual beneficial owners’ often without attracting stamp duty land tax (SDLT) but still avoiding the advance tax on enveloped dwellings (ATED).

    Our fiscal migration and tax planning department is operated by qualified lawyers and accountants and can advise both domiciled and non-domiciled individuals on how to mitigate their individual and corporate tax exposure be it in the UK or abroad. Our legal & business department can provide specialized advice on all domestic and international tax planning issues but also upon ‘key’ issues such as asset protection be it in the form of trusts and private interest foundations (PIF’s). In particular, SCF can provide advice to those intending to relocate to the UK on how to do so in the most tax efficient way.