Labuan Companies

  • 1. How to establish a Labuan company in Labuan IBFC?

    Labuan company can open foreign accounts with any banks in Labuan or outside Labuan. However, the account name must be the Labuan company name.

  • 2. What is the definition of Labuan of trading and non-trading activities?

    Labuan trading activity includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity.

    Labuan non-trading activity means an activity relating to the holding of investments in securities, stocks, shares, loans, deposits or any other properties situated in Labuan by a Labuan entity on its own behalf.

  • 3. What is the definition of Labuan business activities?

    Labuan business activities is defined as a Labuan trading or non-trading activity carried on in, from or through Labuan, excluding any activity which is an offence under any written law.

  • 4. What is the rate of tax imposed on Labuan business activities?

    The rate of tax imposed is 3% of audited net profits for trading activity and zero percent for non-trading activity, provided that the Labuan entities are in compliance with the tax substantial activity requirements.

  • 5. Can a Labuan company elect to be taxed under Income Tax Act 1967?

    A Labuan company can elect to be taxed under ITA, pursuant to Section 3A of Labuan Business Activity Tax Act 1990 (LBATA).

  • 6. Can a Labuan company pay Business Zakat instead of tax?

    A tax rebate is granted to a Labuan company for each year of assessment for any business zakat which is paid in the basis period for that year of assessment to, and evidenced by a receipt issued by, a Labuan Islamic religious authority.

    However, where the total amount of the rebate exceeds the tax charged (before any such rebate) for any year of assessment, the excess is not refunded or is available as a credit to set off his tax liability for that year of assessment or any subsequent year.

  • 7. Do Labuan tax incentives apply to all types of Labuan entities?

    The tax incentives for Labuan IBFC apply to all types of Labuan entities as prescribed under the Labuan Business Activity Tax (Requirement for Labuan business activity) regulations 2018.

  • 8. What is so unique about Labuan tax regime?

    In addition to the numerous tax incentives accorded for Labuan IBFC, the unique features of Labuan tax regime are:

    • Less tax filing obligations;
    • No estimation of income and bi-monthly deductions;
    • Perpetual tax exemptions; and
    • Labuan entities may access benefits under the Malaysia DTAs.

    Labuan entities can invest in domestic companies while enjoying the tax exemptions accorded in Labuan IBFC.

  • 9. What is the difference between trading and investment companies?

    Investment companies usually only "hold" assets, or shares in companies located in other jurisdictions. Trading companies are defined as those which actually carry out business on a day to day basis.

  • 10. Are there any requirements on minimum capital and shareholding?

    A minimum of one share is required. Apart from this there is no minimum capital requirement, and Labuan companies may issue shares of different classes and of different rights but no bearer shares are allowed. Shares may be denominated in any currency except in Malaysian Ringgit.

    The minimum number of shareholders in an offshore company is one (1). The shareholder may be an individual, a corporation or a trust company holding the shares as a nominee, or on trust.

  • 11. Are there any audit requirements?

    A Labuan company is required to maintain proper accounting and other records in Labuan, and those proper accounting and other records shall be kept at the registered office of the company or other places in Labuan. Such accounting and other records shall be open at all times for inspection by a director of the offshore company.
    The minimum number of shareholders in an offshore company is one (1). The shareholder may be an individual, a corporation or a trust company holding the shares as a nominee, or on trust.

  • 12. What is the composition of directors and secretaries in a Labuan company?

    A Labuan company must have at least one director who can act as a resident director and a resident secretary.

  • 13. Does Labuan company need a physical presence in Labuan?

    In order for Labuan company to avail for Labuan IBFC tax incentive, Labuan company is required to have physical office with adequate number of full time employees in Labuan and adequate amount of annual operating expenditure as prescribed under the Labuan substance regulations.

  • 14. Can Labuan company open bank accounts?

    In order for Labuan company to avail for Labuan IBFC tax incentive, Labuan company is required to have physical office with adequate number of full time employees in Labuan and adequate amount of annual operating expenditure as prescribed under the Labuan substance regulations.

  • 15. Is Labuan IBFC subject to exchange control?

    The operations of Labuan companies in Labuan IBFC are completely free from exchange control regulations when dealing with non-residents.

  • 16. What is Labuan Pre-Incorporated Company?

    The Labuan Pre-Incorporated Company (LPC) is basically a normal Labuan company that is incorporated through normal approach but owned but Labuan trust companies (LTC). This is new initiative introduced by Labuan FSA to allow LTC to pre-incorporate a Labuan Company and make it available to investors who are keen to purchase a ready-made company in Labuan.

  • 17. What is the governing legislation for Labuan company?

    Labuan company is governed by Labuan Companies Act 1996.

  • 18. What are the fees payable by Labuan companies in Labuan IBFC?

    The fees payable are illustrated in the table below:

    Registration Fees
    Amount
    Paid-up Capital
    RM 50,000 and below
    RM1,000
    USD300
    Exceeds RM 50,000 but less than RM 1 million
    RM2,000
    USD600
    RM 1 million and above
    RM5,000
    USD1,500
    Registration of foreign company
    RM6,000
    USD2,000
    Annual Fees
    Amount
    Labuan company
    RM2,600
    USD800
    Foreign Labuan company
    RM5,300
    USD1,500

Partnership

Banking

  • 1. What is Labuan Banking ?

    Labuan banking means the business of receiving deposits on current accounts, deposit accounts, savings accounts, and includes the investment banking business, Labuan financial business, Islamic banking business and such other transactions and terms and conditions as specified by Labuan FSA in any currency including Malaysian Ringgit where permitted by Bank Negara Malaysia.

  • 2. What is Investment Banking?

    Investment banking means the business of providing credit facilities and consultancy and advisory services relating to corporate and investment matters, including making investments on behalf of any person. Other activities include undertaking foreign exchange transactions, interest rate swaps, dealings in derivative instruments or derivative financial instruments or any other similar risk management activities.

  • 3. What is Islamic banking?

    Islamic banking is defined as a banking business that is in accordance with Shariah principles.

  • 4. Who may apply for a Labuan banking licence?

    Organisations that meet the following minimum criteria may apply for a Labuan banking licence:

    • Must be a bank or financial institution;
    • Possesses a sound track record;
    • Accorded a good credit rating by acceptable rating agencies;
    • Supervised by a competent regulatory authory; and
    • Conforms to generally accepted standards of international banking practices or the Bank for International Settlements (BIS).

  • 5. What is the minimum working fund for an investment bank?

    RM10 million or its equivalent in any other currency.

  • 6. What products and services are currently offered by Labuan banks?

    Labuan banks offer the following products and services:

    • Term/fixed deposits in major international currencies;
    • Project financing (project evaluation/feasibility studies);
    • Capital restructuring;
    • Revolving credit;
    • Syndication/loan arrangement;
    • Trade financing (letter of credit);
    • Islamic financing;
    • Performance and financial guarantees;
    • Private banking/portfolio fund management;
    • Investment banking / corporate advisory (initial public offerings (IPO), mergers and acquisitions);
    • Listing of financial instruments on the Labuan International Financial Exchange (LFX);
    • Proprietary trading and investment (bonds, equities);
    • Remittances;
    • Foreign exchange;
    • Foreign currency term loan;
    • Derivatives (interest rate swaps, cross currency swaps);
    • Hedging (interest rates – Chicago Board of Trade (CBOT), London Interbank-Offered Rate (LIBOR), etc); and
    • Correspondent banking (for Malaysian banks).

  • 7. Are there any limitations?

    There is no cash transaction in Labuan IBFC. In addition, a Labuan investment bank is not allowed to accept deposits.

  • 8. Can Malaysian residents obtain loans from Labuan banks?

    Yes, they can, subject to the Exchange Control Notice No. 2 issued by Bank Negara Malaysia as follows:

    • For resident entities -- up to an equivalent of RM100 million in aggregate.
    • For resident individuals, sole proprietors or general partnerships -- up to an equivalent of RM10 million in aggregate.

  • 9. Can Malaysian residents obtain loans from Labuan banks?

    With respect to trade financing, buyers and sellers can be outside of Malaysia and the underlying goods to be exported to, or imported from, other countries may also include Malaysia.

  • 10. What is the governing legislation for Labuan banks?

    Labuan banks are governed by the following Labuan laws:

    • Labuan Financial Services and Securities Act 2010;
    • Labuan Islamic Financial Services and Securities Act 2010;
    • Labuan Companies Act 1990; and
    • Labuan Business Activity Tax Act 1990.

  • 11. What are the fees payable by Labuan banks in Labuan IBFC?

    With respect to trade financing, buyers and sellers can be outside of Malaysia and the underlying goods to be exported to, or imported from, other countries may also include Malaysia.

    Fees
    Amount
    Processing Fee
    USD350
    Annual Fee
    Amount
    Labuan Banks / Labuan Investment Banks
    USD30,000
    Co-location Office

    USD3,500

    Marketing Office
    USD2,500

Money Broking

  • 1. What is Labuan Banking ?

    Labuan banking means the business of receiving deposits on current accounts, deposit accounts, savings accounts, and includes the investment banking business, Labuan financial business, Islamic banking business and such other transactions and terms and conditions as specified by Labuan FSA in any currency including Malaysian Ringgit where permitted by Bank Negara Malaysia.

  • 2. What is Investment Banking?

    Investment banking means the business of providing credit facilities and consultancy and advisory services relating to corporate and investment matters, including making investments on behalf of any person. Other activities include undertaking foreign exchange transactions, interest rate swaps, dealings in derivative instruments or derivative financial instruments or any other similar risk management activities.

  • 3. What is Islamic banking?

    Islamic banking is defined as a banking business that is in accordance with Shariah principles.

  • 4. Who may apply for a Labuan banking licence?

    Organisations that meet the following minimum criteria may apply for a Labuan banking licence:

    • Must be a bank or financial institution;
    • Possesses a sound track record;
    • Accorded a good credit rating by acceptable rating agencies;
    • Supervised by a competent regulatory authory; and
    • Conforms to generally accepted standards of international banking practices or the Bank for International Settlements (BIS).

  • 5. What is the minimum working fund for an investment bank?

    RM10 million or its equivalent in any other currency.

  • 6. What products and services are currently offered by Labuan banks?

    Labuan banks offer the following products and services:

    • Term/fixed deposits in major international currencies;
    • Project financing (project evaluation/feasibility studies);
    • Capital restructuring;
    • Revolving credit;
    • Syndication/loan arrangement;
    • Trade financing (letter of credit);
    • Islamic financing;
    • Performance and financial guarantees;
    • Private banking/portfolio fund management;
    • Investment banking / corporate advisory (initial public offerings (IPO), mergers and acquisitions);
    • Listing of financial instruments on the Labuan International Financial Exchange (LFX);
    • Proprietary trading and investment (bonds, equities);
    • Remittances;
    • Foreign exchange;
    • Foreign currency term loan;
    • Derivatives (interest rate swaps, cross currency swaps);
    • Hedging (interest rates – Chicago Board of Trade (CBOT), London Interbank-Offered Rate (LIBOR), etc); and
    • Correspondent banking (for Malaysian banks).

  • 7. Are there any limitations?

    There is no cash transaction in Labuan IBFC. In addition, a Labuan investment bank is not allowed to accept deposits.

  • 8. Can Malaysian residents obtain loans from Labuan banks?

    Yes, they can, subject to the Exchange Control Notice No. 2 issued by Bank Negara Malaysia as follows:

    • For resident entities -- up to an equivalent of RM100 million in aggregate.
    • For resident individuals, sole proprietors or general partnerships -- up to an equivalent of RM10 million in aggregate.

  • 9. Can Malaysian residents obtain loans from Labuan banks?

    With respect to trade financing, buyers and sellers can be outside of Malaysia and the underlying goods to be exported to, or imported from, other countries may also include Malaysia.

  • 10. What is the governing legislation for Labuan banks?

    Labuan banks are governed by the following Labuan laws:

    • Labuan Financial Services and Securities Act 2010;
    • Labuan Islamic Financial Services and Securities Act 2010;
    • Labuan Companies Act 1990; and
    • Labuan Business Activity Tax Act 1990.

  • 11. What are the fees payable by Labuan banks in Labuan IBFC?

    With respect to trade financing, buyers and sellers can be outside of Malaysia and the underlying goods to be exported to, or imported from, other countries may also include Malaysia.

    Fees
    Amount
    Processing Fee
    USD350
    Annual Fee
    Amount
    Labuan Banks / Labuan Investment Banks
    USD30,000
    Co-location Office

    USD3,500

    Marketing Office
    USD2,500

Commodity Trading

Wealth Management

  • 1. What is a Labuan trust?

    A trust can be set up for a wide range of purposes ranging from discretionary, charity, spendthrift protection, etc. Labuan IBFC offers trusts (governed by common law) that can be applied in an Islamic manner as long as they subscribe to Shariah principles. Trusts are highly flexible, covering many types to suit a client’s varied needs. Labuan trusts shall not be valid unless it is created by a will or other instrument in writing, including a unilateral declaration of trust, but a unit trust shall be created only by a will or other instrument in writing.

  • 2. Are trusts required to register with Labuan FSA for their set up in Labuan IBFC?

    Trusts do not have to register with Labuan FSA. However, it must use a Labuan trust company as one of their trustees.

  • 3. Who can set up a Labuan trust?

    A resident or non-resident can do so. In the case of a non-resident, Malaysian property can be injected into a Labuan trust while a Malaysian resident can place international assets into a Labuan trust but Malaysian property requires the approval of the regulator, Labuan FSA.

  • 4. What is the difference between a trust and a foundation?

    Trusts and foundations are differentiated as follows:

    Trusts
    Foundations
    Common law origins.
    Civil law origins.
    Relationship amongst parties is fiduciary.
    Relationship amongst parties is contractual.
    Assets, upon being vested in the trust, are legally owned by the trustee.
    Assets are legally owned by the foundation. Upon registration of the foundation, the property endowed or to be endowed becomes an estate separate and apart from that of the founder by acquiring a separate legal entity status.
    The person who establishes the trust is known as the settlor and the persons who benefit from the trust are known as beneficiaries.
    The person(s) who creates the endowment is known as the founder and the persons who benefit from the endowment are known as beneficiaries.
    The trust deed is the document that establishes the trust.
    The charter is the main constituent document of a foundation. A foundation may also have articles which are a set of more detailed rules governing its administration matters.
    The appointed trustee is the person responsible to hold the trust assets and administer the trust.
    The council is the appointed body entrusted to carry on the business and affairs of the foundation and pursue its objects. The foundation’s officers and council are required to act in accordance with the terms of the charter and articles.
    Registration of the trust is not mandatory.
    Registration of the foundation is mandatory.
    The settlor has certain reserved powers after establishing the trust and vesting the legal title in the trust assets to the trustee.
    The foundation does not have a share capital and does not recognise shareholders. The founder does not retain or acquire any ownership rights in relation to the foundation's property. The law does recognise however, the beneficiaries or the persons in whose benefit the foundation is created, which can include the founder.
    A trust can be established for any lawful purpose but a trust that is set up for a purpose must appoint an enforcer.
    A foundation can be established for any lawful purpose which shall be spelt out in the charter of the foundation.
  • 5. What is a Labuan special trust?

    A Labuan special trust (LST) is an innovative feature of the Labuan Trusts Act 1996 (LTA) and can be used to hold shares in a Labuan holding company, which in turn may own assets. The benefit of an LST is that there is a distinct separation between the custodian role of the trustees and the management of the company which is the responsibility of the directors only. The LST can be used for succession planning, commercial purposes and matrimonial settlement.

  • 6. How is a Labuan trust’s income taxed?

    The rate of tax imposed is 3% of audited net profits.

  • 7. What is the tax implication on the distribution by a Labuan trust?

    The distributions made by a Labuan trust to the beneficiaries are tax-exempt.

  • 8. What is the governing legislation for the business and operations of a Labuan trust?

    A Labuan trust is governed by the Labuan Trusts Act 1996.

  • 9. What are the fees payable by Labuan trusts in Labuan IBFC?

    The definition of Professional Traders has been expanded under the revised Guidelines in which Principal Officer and any officer performing senior managerial functions in specified areas may also be recognised as Professional Traders.


    Registration Fees
    Amount
    Labuan trust / Labuan special trust
    RM750
    USD200
    Renewal fee
    RM50
    USD15

Labuan Foundations and Islamic Foundations

  • 1. What is a Labuan foundation?

    Labuan foundation, like a company, is a corporate body with a separate legal entity, established to hold assets in its own names with the objective of managing the assets for the benefit of its beneficiaries, or particular purposes, or both. It is typically used for private wealth management and charitable purposes.

    The Labuan foundation is an orphan structure where they do not have shareholders. Labuan foundations are managed by one or more officers and operates in accordance with the constituent documents comprising of charter and articles.

    In the case of an Islamic foundation, the foundation’s aims and operations shall be in compliance with Shariah principles.

  • 2. What is the basic structure of a Labuan foundation?
    The structure of a Labuan foundation consists of the following:
     
    • Registered office – A Labuan Foundation must be registered and has a registered office. 
    • Charter - sets out the parameters within which a Labuan foundation is managed and governed. 
    • Key Management - consists of officer and secretary. For charitable foundations which soliciting public donations, it is mandatory to appoint council members and supervisory person.   
     
    ​​The key management is comprised of:
      1. Officer - primarily administrative as the officer is responsible for ensuring the proper administration of the foundation. 
      2. Secretary - acts as the service provider to the foundation and performs all secretarial functions including filing and lodging of documents with Labuan FSA. 
      3. Council member - responsible for the general supervision of the foundation management and ensuring that the purpose for which the foundation was established is fulfilled in accordance with the charter, articles and the law. In effect, the council is similar to the Board of Directors of a company. 
      4. Supervisory person – to ensure the council members act in accordance with the charter as well as safeguard the Labuan foundation’s properties in line with its purpose and object. 
     
    • Assets - assets endowed to a Labuan foundation become the assets of that foundation with full legal and beneficial title. The assets shall cease to be the property of the founder. These assets are to be applied only for the benefit of the identified purpose(s) of the foundation. 
    • Beneficiaries - include individuals, corporate entities or charities and are those who have vested interest in the assets of the foundation. Unless specifically provided in the charter or articles, beneficiaries have no rights to the foundations assets prior to the distribution of assets and are not owed any fiduciary duties. 
    • Dissolution - can be dissolved upon the passing of a resolution by the officer on the basis that the foundation is established for a definite period and that period has expired; the purpose of the foundation is fulfilled or becomes incapable of fulfilment; or the charter requires such dissolution. After the dissolution, the ownership of the remaining assets will be transferred to the beneficiary in accordance with the provision of the constituent document, or otherwise the section 69(3) of Labuan Foundations Act 2010 (LFA).
  • 3. What is the governing legislation for the business and operations of Labuan foundations?

    Labuan foundations are governed by the LFA while Labuan Islamic foundations are governed under Part IX of Labuan Islamic Financial Services and Securities Act 2010.

  • 4. What are the advantages of Labuan Foundations?

    • Legal Personality – The feature of a separate legal entity means that all liabilities remain as the corporate liabilities of the foundation. The Labuan foundation is also protected from foreign claims and cannot be forcefully liquidated to satisfy other obligations such as claims arising from a divorce, lawsuit or creditors.
    • Initial endowment – Although no minimum amount of assets is stipulated for an endowment, it is expected that a registration of Labuan foundation would be accompanied by an endowed assets of at least USD1.
    • Reserve powers of a founder – a founder may retain certain powers in the Labuan foundations e.g. for the purpose of amendments of charter, appointment and removal of beneficiaries. A founder can also be a council member so as to enable him to manage the foundation and its assets.
    • Life span of Labuan Foundations – Labuan foundations may exist ‘in perpetuity’ as there is no finite period limitation stipulated under the Labuan Foundation Act. This provides for the continuity of the Labuan foundation as needed by the founder.
    • Continuity - A foundation established in another jurisdiction can be legally redomiciled to Labuan and vice versa provided that the other jurisdiction permits and recognise such redomiciliation.
    • Confidentiality - The officer, council member, supervisory person and secretary are restricted from disclosing any information relating to the foundation unless otherwise required or provided for by law, the court or the charter.

  • 5. Are foundations required to register with Labuan FSA for their set up in Labuan IBFC?

    Yes. It is mandatory for Labuan foundations to be registered with Labuan FSA.

  • 6. How do I register a foundation in Labuan?

    Applications for registration of a Labuan foundation must be submitted to Labuan FSA by a Labuan trust company, who shall act as the Secretary of the foundation. Following the submission of the registration documentation, Labuan FSA shall review and conduct the necessary CDD on the applicant. Upon payment of the required registration fee, a certificate of registration will be issued.

    To register a Labuan Islamic foundation, the following shall be observed:

    • The Memorandum of Association states that the aims and operations of the Labuan Islamic foundation will not involve any element which is not in compliance with Shariah principles;
    • The officers of a Labuan Islamic Foundation shall appoint a qualified person as a Shariah adviser, or consult a qualified person, who shall advise the Labuan Islamic foundation on the management and operations of the Labuan Islamic Foundation and ensure compliance with Shariah principles.

  • 7. Can Labuan foundations be registered for both charitable and non-charitable purposes?

    Generally, a Labuan foundation must be registered either for charitable or non-charitable purpose. However, a Labuan non-charitable foundation may be allowed to undertake charitable activities provided these are incidental to their philanthropic purpose i.e. not the primary activities of the non-charitable foundation. This must be indicated clearly in the charter and the foundation is not allowed to solicit public donations.

  • 8. Can a third party become a founder subsequent to the formation of the foundation?

    No. A founder refers to the person who subscribes his name to the charter during establishment of the Labuan foundation and endows the foundation with initial assets.

  • 9. Can a foundation be registered without any initial endowment?

    No, as at the point of its registration, the type of initial assets endowment must be specified i.e. provided in the charter. The actual endowment of these assets must then be performed within a period of twelve months from the date of registration of the foundation pursuant to section 12(4)(b) of LFA.

  • 10. If a third party gives an asset to an existing Labuan foundation, can he then become a founder? How would the law regard the asset given to the foundation?

    No, as the founder refers to the person who establishes the Labuan foundation by endowing it with initial assets. Assets given by third parties shall not be regarded as endowments.

  • 11. Can assets endowed be allowed to be withdrawn by the founder under normal circumstances?

    No, once assets are endowed, the founder will not have any legal rights to them as the same have been transferred to the Labuan foundation.

  • 12. Is the requirement for a Labuan charitable foundation to submit a copy of certified resolution if the endowment is from a corporation and/or a copy of letter of undertaking if the endowment is from an individual is only applicable to initial endowment

    The above applies to both initial endowment and subsequent endowments from corporation or identified individual. However, this is not applicable for any donations made by the public to the charitable foundation, regardless whether these are in cash or non-cash form.

  • 13. Can a non-charitable foundation be converted to charitable foundation? What are the procedures for this?

    Yes. The non-charitable foundation needs to amend its charter and obtain prior approval from Labuan FSA. Furthermore, if the foundation intends to solicit public donations, it would be subjected to additional requirements as provided in the Guidelines.

  • 14. What is the difference between a trust and a foundation?

    Labuan IBFC offers trusts (governed by common law) and foundations (under the civil law code), both types of which can be applied in an Islamic manner as long as they subscribe to Shariah principles. Both trusts and foundations are highly flexible, covering many types to suit different needs.

    Trusts and foundations are differentiated as follows:


    Criteria
    Foundation
    Trust
    Origin
    Civil law origins
    Common law origins
    Legal personality
    Legal entity (may sue or be sued in its name)
    Not a legal entity
    Registration requirement
    Mandatory
    Optional
    Ownership of assets
    Assets endowed to a foundation shall be legally owned by the foundation
    Assets, upon being vested in the trust, are legally owned and held in trust by the trustee
    Constituent document
    Charter and articles
    Trust deed
    Reserved power
    The founder does not retain any ownership rights in relation to the foundation’s property
    The settlor has certain reserved power after establishing the trust
    Enforcement
    Law and regulations
    Letter of wishes
    Governance
    Council members
    Trustees
  • 15. Can an officer becomes a supervisory person?

    Officer and supervisory person shall not be the same person to avoid conflict of interest in performing their respective roles.

  • 16. How is a Labuan foundation’s income taxed?

    The rate of tax imposed is 3% of audited net profits.

  • 17. What is the tax implication on distributions by a Labuan foundation?

    The distributions made by a Labuan foundation are tax-exempt.

  • 18. What are the relevant fees pertaining to the registration and operation of Labuan foundations?

    The fees payable are illustrated in the table below:

    Fees
    Amount
    Registration fee
    RM750
    Annual fee

    RM750

    Approval for change of name
    RM250
    Restoration to register
    RM750
    Search or inspection of any document kept by the Authority (by the foundation including Founder, beneficiaries, council and officers)
    RM20
    Search or inspection of any document kept by the Authority (others)
    RM200
    Redomiciliation
    RM750

Capital Markets

  • 1. What is a mutual fund?

    A mutual fund or fund means a Labuan company, a corporation incorporated under the laws of any recognised country or jurisdiction, a partnership, a protected cell company, a foundation or a unit trust which:

    • Collects and pools funds for the purpose of collective investment with the aim of spreading investment risk; and
    • Issues interests in a mutual fund which entitles the holder to redeem his investments that is agreed upon by the parties and receives an amount computed by reference to the value of a proportionate interest in the whole or part of the net assets of the aforesaid types of entities, as the case may be, and includes an umbrella fund whose interests in a mutual fund or unit are split into a number of different class funds or sub funds and whose participants are entitled to exchange rights in one part for rights in another.

    Two types of funds are prescribed under the Labuan Financial Services and Securities Act 2010, namely private funds and public funds.

  • 2. What is a private fund?

    A private fund is defined as a fund whose shares are:

    • Not offered to the general public, are owned by not more than 50 investors, and where the first-time investment of said investors is not less than RM250,000 or such other sum as may be prescribed by Labuan FSA or the equivalent in a foreign currency; or
    • Owned by any number of investors, where the first-time investment of each of such investors is not less than RM500,000 or such other sum as may be prescribed by Labuan FSA or the equivalent in a foreign currency.

    An Islamic private fund is a private fund with a similar definition to the above and is in compliance with Shariah principles.

  • 3. What is a public fund?

    A public fund is a mutual fund other than a private fund, and an Islamic public fund is a public fund that is in compliance with Shariah principles.

  • 4. What is a fund management company?

    A fund management company or manager is a person who, for valuable consideration, provides management services and/or investment advice, or administrative services in respect of securities for the purposes of investment, investment advisory services, fund manufacturing services or such other activities as may be prescribed by Labuan FSA

  • 5. What is a fund administrator?

    A fund administrator means a person who, for valuable consideration, provides a mutual fund with administrative services or facilities alone or with accounting services.

  • 6. Who may provide fund management services in Labuan IBFC?

    An applicant should have the following minimum eligibility criteria:

    • The applicant is a licensed fund management company from a recognised jurisdiction; and
    • Any company set up by individual fund managers who are licensed by the relevant home supervisory authorities may be permitted, provided they receive written approval from Labuan FSA.

  • 7. What is a securities licensee?

    A securities licensee means a person who, for valuable consideration, provides investment advice or administrative services in respect of securities for the purposes of investment, including dealing in securities or such other activity as may be specified by Labuan FSA.

  • 8. Can a protected cell company be established to conduct a mutual fund business?

    A Labuan protected cell company (PCC) may be established to conduct a mutual fund business in accordance to either conventional or Islamic principles.

  • 9. What is the Labuan International Financial Exchange?

    No, as the founder refers to the person who establishes the Labuan foundation by endowing it with initial assets. Assets given by third parties shall not be regarded as endowments.

  • 10. What are the benefits to list on LFX?

    Application for listing on the LFX can be approved in a shorter period, only two (2) market (business) days, subject to all required documentation received being accurate and complete.

  • 11. How is a Labuan entity undertaking fund management activities taxed?

    The rate of tax imposed is 3% of audited net profits.

  • 12. What is the tax implication on distribution of profits by a Labuan fund management company?

    Dividends received from a Labuan fund management company are tax-exempt.

  • 13. What are the fees payable?

    The fees payable are illustrated in the table below:

    Fees
    Processing Fee
    Annual Fee
    Private Fund
    USD600
    Nil
    Public Fund
    USD350
    USD600
    Fund Manager
    USD350
    USD1,500
    Fund Administrator
    USD350
    USD600
    Securities Licensees
    USD350
    USD1,500
    PCC Mutual Fund (Core)
    USD1,500
    USD1,500
    PCC Mutual Fund (Cell)
    USD600
    USD600

    All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year.

Insurance

  • 1. What is a Labuan insurance and insurance-related business?

    A Labuan insurance business means an insurance business transacted in foreign currency and includes life, general, reinsurance, captive insurance, insurance manager, underwriting manager and insurance broking, but does not include domestic insurance business.

  • 2. What are the criteria to set up an insurance entity in Labuan IBFC?

    An applicant is eligible to apply for a licence to conduct Labuan insurance and insurance-related activities in Labuan IBFC if it meets the following criteria:

    • Has a good financial performance track record, at least in the three years preceding the application;
    • Has the necessary expertise (management competency) and staffed with appropriate and adequate personnel to run the insurance business;
    • Has no adverse report from the respective home regulatory authorities or announcement in financial journals, newspaper or any other reliable sources; and
    • Has a good business plan.

  • 3. What is a permitted business activity of a Labuan captive insurer?

    A Labuan captive insurer may underwrite direct insurance/reinsurance (general or life) business risks of their own group or third party risks subject to Labuan FSA’s approval.

  • 4. What is a rent-a-captive?

    A rent-a-captive is a captive insurance company that can be utilised by a number of users, or so called renters without voting control of the captive. While none of the users will own the rent-a-captive, each will enjoy the commercial benefits of a captive. The captive facility "rents" out its capital, surplus and licence to the policyholder and usually provides administrative services, reinsurance and/or an admitted fronting company.

  • 5. What kind of insurance can be insured by a captive insurance company?

    Almost any kind of risk can be insured by a Labuan captive insurance company.

  • 6. What is a protected cell company?

    A Labuan company may be incorporated as a protected cell company (PCC). In addition, an existing Labuan company can be converted into a PCC. The PCC has the ability to form "cells". The cells of a PCC may comprise:

    • A core for holding non-cell assets or general assets; and
    • Any number of cells with the intention of segregating and protecting the assets of each respective cell.

    Neither the core nor the individual cells created are separate legal entities but nonetheless, each cell is legally separated from any other cell and each has sufficient attributes to carry on business independently under the "umbrella" of the Labuan PCC. A Labuan PCC may be established to conduct captive insurance/reinsurance in accordance to either conventional or Islamic principles.

  • 7. How is a Labuan PCC taxed?

    The rate of tax imposed is 3% of audited net profits.

  • 8. What is the tax implication on the cells of the PCC?

    The income of the cell(s) under the PCC is taxed on a consolidated basis in the name of a Labuan PCC.

  • 9. What is the tax implication on the distributions of profits by the cells in a PCC?

    The dividends received from the Labuan PCC by the cells are tax-exempt.

  • 10. What is the governing legislation for the Labuan insurance and insurance-related companies business?

    The Labuan insurance and insurance-related companies business is governed by the following Labuan laws:

    • Labuan Financial Services and Securities Act 2010;
    • Labuan Islamic Financial Services and Securities Act 2010;
    • Labuan Companies Act 1990; and
    • Labuan Business Activity Tax Act 1990.

  • 11. What are the fees payable by insurance entities in Labuan IBFC?

    The fees payable are illustrated in the table below:

    Fees
    Amount
    Processing Fee
    USD350
    Annual Fee
    Amount
    General Insurer/Life Insurer/Labuan Reinsurer
    USD15,000
    Insurance Broker/Insurance Manager/Underwriting Manager
    USD6,500
    Captive Insurance
    USD3,000
    Master Rent-a-Captive
    USD4,000
    Subsidiary Rent-a-Captive
    USD1,000
    PCC Captive (Core)
    USD9,500
    PCC Captive (Cell)
    USD3,000
    Co-location Office Fee
    USD3,500
    Marketing Office Fee
    USD2,500

    All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year.

Trust Companies and Ancillary Services

  • 1. What are the registration and operational requirements for a trust company?

    The applicant for a Labuan trust company licence shall:

    • Register itself as a trust company and must be a company incorporated or registered under the Labuan Companies Act 1990 (LCA). The name of the company shall include the word “Trust”, “Trustee” or other such words as approved by the Registrar;
    • Provide a business plan covering types of products and services to be offered, target market, management team, manpower planning and three years’ financial projections;
    • Have a capital or working funds of at least RM150,000 or its equivalent in any foreign currency;
    • Have a professional indemnity insurance of not less than RM1 million or its equivalent in any foreign currency;
    • Ensure the directors and officers designated as trust officers are fit and proper persons responsible for the management of the Labuan trust company in Labuan;
    • Provide a letter of guarantee or undertaking to Labuan FSA for the liability of the Labuan trust company; and
    • Appoint at least two approved trust officers, one of whom is domiciled in Labuan. The trust officers are employees of the trust company who have been approved by Labuan FSA as trust officers.

  • 2. Are there any specific requirements relating to trust officers?

    Yes. A trust officer should be:

    • An advocate and solicitor or a person who possesses a degree in law;
    • A member of the Malaysian Institute of Accountants or any other association of accountants approved by Labuan FSA;
    • An associate/fellow of any association of bankers, insurers, company secretaries or similar bodies;
    • A person who has had uninterrupted service of not less than 10 years in any public service or statutory body; or
    • Any other person comparable to the above.

  • 3. What is a Labuan managed trust company?

    A managed trust company (MTC) is a trust company registered under the Labuan Companies Act 1990 (LCA), and is managed by a fully-operational trust company in Labuan.

    The MTC is set up by a parent company to provide offshore trust services to its clients, while being managed by a third party (a locally-licensed trust company). This allows the parent company to extend its product offerings to its clients without having to set up or maintain a presence in Labuan, thus avoiding the substantial expense and fixed costs of establishing, resourcing and equipping a new office.

    In addition, the MTC would enjoy access provided by the managing company to specialists and experienced professionals who have existing relationships with local regulators, thus allowing the parent company to establish an offshore presence while maintaining its high standard of service.

  • 4. What is a Labuan private trust company?

    A Labuan private trust company is a Labuan company or foreign Labuan company registered to undertake the services of a trust company for the purpose of a private trust(s) created by a settlor or individuals connected to the settlor described in the trust instrument creating the private trust.

  • 5. How is the income of a Labuan company licensed as a trust company taxed?

    The rate of tax imposed is 3% of audited net profits.

  • 6. What is the governing legislation for Labuan trust companies?

    Labuan trust companies are governed by the following Labuan laws:

    • Labuan Financial Services and Securities Act 2010;
    • Labuan Islamic Financial Services and Securities Act 2010;
    • Labuan Companies Act 1990; and
    • Labuan Business Activity Tax Act 1990.

  • 7. What are the fees payable by Labuan trust companies in Labuan IBFC?

    The fees payable are illustrated in the table below:

    Fees
    Amount
    Processing Fee
    USD350
    Annual Fee
    Amount
    Trust Company
    USD5,000
    Managed Trust Company
    USD5,000
    Labuan Private Trust Company
    USD1,500

    All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year.

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Access a wealth of information from Labuan IBFC from reports on forward-thinking research to insightful articles.
Get in touch
Interested to setup your business in Labuan? Speak to our dedicated advisors to find out more.
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