Labuan Trading Company

Setting Up a Labuan Trading Company

Labuan, an island territory of Malaysia, is an emerging hub for international business and financial activities. Setting up a trading company in Labuan offers numerous advantages, including a favourable tax regime and a strategic location within the Asia-Pacific region.

Here, we’ll break down the steps, benefits, and types of business activities that a trading company in Labuan can undertake.

Advantages of Setting Up a Labuan Trading Company

1. Favorable Tax Regime:

  • Trading Activities: Income from trading activities is taxed at 3% of net audited profits.
  • Non-Trading Activities: Income from investment holding and other non-trading activities is tax-exempt.

2. Corporate Benefits:

  • No Withholding Tax: On dividends, interest, royalties, service fees, and lease payments to non-residents.
  • Exemption from Stamp Duty: On all instruments executed by Labuan entities.
  • 100% Foreign Ownership: Full foreign ownership is permitted.
  • Access to Malaysia’s Double Taxation Agreements (DTAs): Labuan companies can benefit from Malaysia’s extensive network of DTAs, providing relief from double taxation.
  • No Foreign Exchange Controls: Labuan companies enjoy the freedom of capital movements without currency restrictions.

3. Business Environment:

  • Strategic Location: Labuan is well-placed within the Asia-Pacific region, offering access to major markets.
  • Ease of Doing Business: Labuan provides a business-friendly environment with a well-developed infrastructure and a skilled workforce.
  • Legal and Regulatory Framework: Governed by robust regulations administered by the Labuan Financial Services Authority (LFSA).

Steps to Set Up a Labuan Trading Company

1. Choose a Company Type:

  • Labuan Company: Incorporated in Labuan, may be limited by shares or guarantees.
  • Labuan Foreign Company: A branch of a foreign company registered in Labuan.
  • Labuan Protected Cell Company: For specific activities such as insurance and mutual funds.

2. Incorporation Requirements:

  • Share Capital: Can be in any currency with no minimum par value.
  • Directors: At least one director (can be a resident or non-resident).
  • Company Secretary: Must appoint a Labuan Trust Company as the secretary.
  • Registered Office: Must be located at a Labuan Trust Company.

3. Economic Substance Requirements:

  • Must have a minimum number of employees and incur a minimum annual operating expenditure in Labuan based on the specific activity undertaken.

4. Incorporation Fees:

A. Incorporation
  • Incorporation of Labuan Company: USD 5,400.00
  • Provision of Registered Office & Secretarial Services: USD 5,400.00
  • Incorporation Fees Payable to Labuan LFSA: USD 900.00
  • Application of Tax Reference: USD 450.00
  • Disbursement: USD 900.00
  • Due Diligence and World-Check: USD 450.00
B. Establishment Of Bank Account
  • Total: USD 1500.00
C. Total Incorporation Fee
  • Total: USD 15,000.00

5. Ongoing Compliance:

  • Annual Fees: USD 7,200 for a Labuan company; and USD 13,500 for a foreign Labuan company.
  • Audited Accounts: Required for tax filing purposes.

Types of Business Activities under Labuan Trading Company

Labuan trading activities encompass a wide range of business operations, including but not limited to:

  • Banking and Insurance: Providing financial services to clients.
  • Trading: Importing, exporting, and trading goods and services.
  • Management and Consultancy: Offering management, consultancy, and advisory services.
  • Shipping Operations: Managing and operating shipping lines and vessels.
  • Licensing and Franchising: Licensing and franchising business models and intellectual properties.

For more information about trading activities in Labuan or to set up a Labuan trading company, details can be submitted through this form. This assistance will help navigate the process and ensure the business is established successfully.

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