Labuan (Malaysia) company formation for non-residents

Who a Labuan company suits

Labuan is Malaysia's international business and financial centre, an island federal territory with its own company and tax laws. A Labuan company suits regional trading, service and holding businesses that want a low, predictable tax rate inside a regulated framework.

It works best when you can put real activity in Labuan: staff, an office and spending. If you want a company with no local presence, Labuan is the wrong tool. Hong Kong, Singapore or an offshore company may fit better, and we compare them with you before you pay.

Typical Labuan users include regional trading companies selling into Asia, service companies billing group entities, and holding companies for shares in operating subsidiaries. Each uses a different activity category, and each category carries its own substance test.

What a Labuan company is

A Labuan company is formed under the Labuan Companies Act 1990 and regulated by the Labuan Financial Services Authority (Labuan FSA). It is separate from a Malaysian Sdn. Bhd., which is formed under the Companies Act 2016 and pays Malaysian corporate tax.

Every Labuan company must be incorporated through a licensed Labuan trust company. The trust company provides the registered office in Labuan and the resident secretary, and keeps the accounting records there.

One director is enough. Shareholders can be individuals, companies or trust companies. Bearer shares are not allowed.

• Certificate of incorporation from Labuan FSA.
• Constitution and first board resolutions.
• Registers of directors, members and beneficial owners.
• Share certificates in registered form.

Tax: 3% on trading, 0% on non-trading

Under the Labuan Business Activity Tax Act 1990, a Labuan company carrying on trading activity pays tax at 3% of its audited net profits. Non-trading activity, meaning holding investments such as shares and securities, is taxed at 0%.

A Labuan company can instead elect to be taxed under Malaysia's Income Tax Act 1967 (section 3A of the Labuan Business Activity Tax Act). Some groups choose this for treaty or business reasons.

Large multinational groups should also check the global minimum tax rules. HASiL has published guidance on how Pillar Two applies in Malaysia, and a Labuan entity in a large group can be affected.

The rate you pay also depends on how your income is classified. Trading covers activities such as buying and selling, services and financing; holding shares and securities is non-trading. A company that does both is assessed on each part separately, so we map your income streams with the trust company before you start (confirm with your specialist).

Substance: staff and spending in Labuan

The 3% and 0% rates depend on meeting substance requirements. The Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 set a minimum number of full-time staff in Labuan and a minimum annual operating spend in Labuan for each activity.

The figures differ by activity. General trading has no row of its own in the schedule, so we agree the right classification with you and the trust company before you commit.

Staff must be full-time and based in Labuan, and the spending must be incurred in Labuan. Trust companies and service providers in Labuan offer office space and staffing, and we can introduce you. We document the plan so it can be shown to HASiL if asked.

• Investment holding other than pure equity holding: 1 full-time employee and MYR 20,000 a year.
• Pure equity holding: no staff minimum and MYR 20,000 a year, plus a yearly board meeting in Labuan, a resident secretary, and board minutes and records kept in Labuan.
• Administrative, accounting, back-office and similar services: 2 staff and MYR 50,000 a year.
• Labuan company management and fund management: 2 staff and MYR 100,000 a year. Leasing: 2 staff per group of up to 10 related companies and MYR 100,000 per company.

Audit, tax return and ownership filings

A trading company files its annual tax return (Form LE1) with HASiL, the Inland Revenue Board of Malaysia, based on audited accounts. The return is due within 7 months of the end of the accounting period and must be filed electronically through MyTax (Form e-LE1).

The Labuan Companies (Amendment) Act 2025, in force since April 2025, adds a formal beneficial ownership regime. The company keeps a register of beneficial owners. Owners must tell the company of changes within 30 days, and changes are lodged with Labuan FSA within 30 days. Labuan FSA controls who can see the information; it is not a public register.

The company also pays an annual fee to Labuan FSA to stay in good standing. Your renewal price includes it.

Accounting records are kept in Labuan, at the registered office. Keep invoices, contracts and bank statements in order through the year; it makes the audit faster and the 7-month deadline easier to meet.

Currency, Malaysian dealings and banking

Labuan companies were historically kept apart from the Malaysian domestic market, with share capital outside ringgit and limits on dealings with residents. Since the Labuan Companies (Amendment) Act 2025 came into force in April 2025, share capital can be expressed in any currency, including ringgit. Rules on dealings with Malaysian residents are a separate matter, so we check them for your plan (confirm with your specialist).

We introduce you to suitable banks in Labuan or elsewhere and prepare the application; the bank decides. Real substance in Labuan usually makes the review easier.

Bring a short business plan, the substance plan, contracts or letters of intent with your main counterparties, and the ownership chart. Banks look for a clear link between the company, its Labuan presence and its money flows.

What you pay with OCC

Your year-1 package starts at a fixed quote all-in, with the Labuan FSA fees and trust company services included. From year 2 the renewal starts at a fixed quote. Both figures are shown before you pay.

Audit, bookkeeping and the cost of meeting substance, such as staff and office space in Labuan, depend on your activity and are quoted separately. If we cannot incorporate your company, we refund the service fee (minus courier costs).