Labuan Company Formation
Last updated: November 2026
Labuan company formation always runs through a licensed Labuan trust company, which files with the Labuan Financial Services Authority (Labuan FSA) under the Labuan Companies Act 1990. Approval follows within 24 hours of a complete file. Trading activity is taxed at 3% of net audited profits and holding investments at 0%, provided the company meets the substance minimum set for its activity. A company that misses it pays 24% for that year.
We set up Labuan companies for owners based anywhere. We classify the activity as trading or non-trading and appoint the trust company that serves as resident secretary. For an activity the substance rules do not list, such as general goods trading, we confirm the tax treatment before incorporation. Then we work out who will hold the resident director seat and what substance the activity needs, and introduce the company to banks. Every structure is quoted individually.
| Quick facts | Value |
|---|---|
| Local company form | Labuan company limited by shares, equivalent of an LLC / private limited company |
| Registrar and filing | Labuan FSA (system COR@L), through a licensed Labuan trust company |
| Shareholders | One or more, any nationality; no bearer shares |
| Minimum capital | None; one share, in any currency, ringgit included |
| Directors | At least one natural-person resident director, who may live anywhere |
| Secretary | Resident secretary from a Labuan trust company |
| Registered office | In Labuan, at a trust company's principal office or another approved office |
| Tax on trading activity | 3% of net audited profits, once the substance minimum set for the activity is met |
| Tax on non-trading (holding) activity | 0%, with substance |
| Substance not met | 24% on that year's chargeable profits |
| Incorporation approval | 24 hours after a complete file (client charter: 1 working day) |
| Exchange control | Non-resident under Bank Negara Malaysia's Foreign Exchange Policy |
Why Form a Company in Labuan
Low tax tied to real activity. A trading company pays 3% of the net profit in its audited accounts, and a company that only holds investments on its own behalf pays nothing. Both rates hold only while the company meets the substance minimum set for its activity in Labuan.
Light capital rules. A single share held by a single shareholder will do, with no minimum capital. Since the 2025 amendment, share values may be in any currency, ringgit included. Bearer shares are banned.
Access to Malaysian customers. A Labuan company may carry on business with Malaysian residents (s.7(2)), and the 2022 amendment dropped the duty to report those deals to Labuan FSA.
Treaty claims on evidence. Malaysia has 75 comprehensive tax treaties in force, but some may restrict benefits for Labuan entities taxed under the Labuan Business Activity Tax Act. A Labuan entity needs a certificate of residence under s.3B before claiming relief, and we check the treaty concerned before you rely on it.
Weighing Labuan against Singapore, Mauritius, the BVI or Seychelles? Set its 3% and substance minimums beside each alternative's. Selling mainly to Malaysian customers? Look at a Malaysian Sdn Bhd first, for the deduction reason below.
What are the disadvantages of a Labuan company?
Substance means real staff and spending: a company providing management or administrative services needs two full-time employees and RM50,000 of annual operating expenditure in Labuan to keep 3%. Malaysian customers lose most of their tax deduction on payments to it. Royalties sit outside the regime, an audit is needed in practice, and exchange control treats the company as a non-resident.
Company Types Available in Labuan
Under s.14(3) of the Labuan Companies Act 1990, a Labuan company may be limited by shares, limited by guarantee or unlimited.
Labuan Company Limited by Shares
An individual or a corporation can be the sole shareholder, and share classes and fractional shares are allowed (s.47(1)). The board needs a natural-person resident director, with corporate directors only alongside. A resident secretary completes the structure.
What does Labuan company mean?
A Labuan company is incorporated under the Labuan Companies Act 1990 and registered by Labuan FSA. Limited by shares, it is the Labuan equivalent of an LLC or private limited company, often called a Labuan offshore company. Owners of any nationality use it to trade at 3% or hold investments at 0%, where the activity meets its prescribed substance minimum.
Labuan Protected Cell Company
A protected cell company under Part VIIIB operates through segregated cells and needs Labuan FSA approval.
Foreign Labuan Company
A company incorporated elsewhere can register as a foreign Labuan company (s.121), with a Labuan trust company as its agent.
Other Labuan Entities
Foundations, limited partnerships, limited liability partnerships, trusts and their Islamic variants also fall under the Labuan Business Activity Tax Act 1990 (LBATA). Trust companies also hold ready-made, pre-incorporated companies.
Foreign Ownership Rules in Labuan
No nationality limit applies to Labuan shareholders, and for directors the only one is the resident director exclusion below. Residents and non-residents of Malaysia may both set up Labuan companies. Roles are regulated instead. See how director and ownership rules compare across countries.
Who can be the resident director of a Labuan company?
Since the 2022 amendment to s.87, every Labuan company needs at least one resident director; existing companies had until 9 February 2023. The seat can go to a trust officer of a Labuan trust company. It can also go to any individual aged 18 or over, of any nationality except Israel and North Korea, living anywhere in the world.
Labuan FSA's clarification note on resident directors confirms who qualifies. The secretary must be a trust officer of a Labuan trust company, or a trust-company-owned company approved by Labuan FSA. A company left without a secretary for 30 days after a resignation is deemed struck off (s.93). The registered office sits in Labuan, at a trust company's principal office or another approved address (s.85(1)).
How to Register a Labuan Company: Step by Step
Labuan company registration is handled by Labuan FSA, set up under the Labuan Financial Services Authority Act 1996, which keeps the register and runs the COR@L filing system. A licensed Labuan trust company submits every application after its own due diligence. As your formation agent, we prepare the file with the trust company and track it to approval under Labuan FSA's incorporation and registration procedures.
- Appoint the trust company. It becomes the resident secretary, and its principal office can serve as the registered office.
- Company name. Approval takes 24 hours and the name is held for three months; non-English words need a certified English rendition.
- Licensed activities. Banking, insurance and takaful, fund management, securities, money broking, payment systems, leasing and factoring need Labuan FSA approval before incorporation and sit outside this page.
- Lodge the file. The trust company submits the memorandum and articles, its statutory declaration of compliance, and each director's consent and individual form.
- Approval. Labuan FSA approves within 24 hours of complete documents and due diligence clearance, or 1 working day in its client charter.
- First month. The registered office notice is due within one month (s.85(2)), and the beneficial ownership register opens under Part VA.
Required Documents
Labuan FSA's procedure fixes the lodgement set:
- Memorandum and articles of association
- The trust company's statutory declaration of compliance
- Each director's written consent and individual form
- The name application, with a certified English rendition of any non-English word
Due diligence comes first. The trust company checks the owners and directors before filing, and Labuan FSA clears the file again before approval. We collect what the trust company asks for and review it before submission.
Labuan Company Formation Timeline and What Our Package Covers
| Formation stage | Statutory or official time limit |
|---|---|
| Name approval | 24 hours; name held for three months |
| Incorporation approval | 24 hours after a complete file; client charter 1 working day |
| Registered office notice | Within one month of incorporation |
| Election into the Income Tax Act 1967, if chosen | Within three months after the basis period begins |
What we handle:
- Trading or non-trading classification, including income outside LBATA
- Choice of trust company and coordination of its due diligence
- Name reservation and incorporation lodgement
- Advice on the resident director seat under s.87
- A substance plan: staff, spending and board meetings in Labuan
- Set-up of the register of beneficial owners
- Bank introduction
- Accounting, coordination of the audit with an approved auditor, and LBATA filings through our accounting and tax compliance service
The total turns on the substance level, the owners and directors to clear, the banks and the audit scope. After one conversation you receive a written quote.
Tax Overview for Labuan Companies
Labuan business activity is taxed under the Labuan Business Activity Tax Act 1990 (LBATA), not the Income Tax Act 1967. Trading income bears 3% (rate applicable in 2026) of chargeable profits, meaning the net profits in the audited accounts (s.4), with no cap. Non-trading activity, holding securities, shares, loans, deposits or other property on the company's own behalf, is not charged to tax (s.9). Anything that is not non-trading counts as trading, and a company doing both is a trading company (s.2(1), (2)). The 3% also depends on the substance minimum for the activity. For an activity with no category in the 2021 substance regulations, such as general goods trading, we confirm the treatment before you incorporate.
Three things move a company off these rates:
- Missing substance: 24% on that year's chargeable profits (s.2B(1A)).
- Intellectual property income: royalties are taxed under the Income Tax Act 1967.
- Election: an irrevocable election into the Income Tax Act 1967, made within three months after the basis period begins (s.3A).
Returns go electronically to the Director General of Inland Revenue within seven months after the accounting period closes (ss.5, 10). Labuan entities issue e-invoices under the Income Tax Act rollout (s.22DA), and GloBE top-up taxes reach those in groups with revenue of EUR 750 million or more (s.3(2)). A Malaysian resident paying a Labuan company cannot deduct 25% of interest and lease rental, or 97% of other payments. Compare the 3% with other regimes in our corporate tax rates by country table.
Is Labuan a tax haven?
Not in the classic sense. The low rates depend on substance in Labuan, such as staff and spending, and a company that misses the test pays 24%. Beneficial owners are recorded, with changes lodged with Labuan FSA, company particulars are searchable on REEFS, and large groups face GloBE top-up tax. Labuan is a low-tax regime with conditions attached.
Labuan Substance Requirements
Section 2B of LBATA makes both rates conditional on substance, with minimums set by the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 (P.U.(A) 423/2021). For service and investment holding activities:
| Activity | Full-time employees in Labuan | Annual operating expenditure in Labuan |
|---|---|---|
| Administrative, accounting, legal, backroom processing, payroll, talent management, agency, insolvency-related and management services | 2 | RM50,000 |
| Investment holding other than pure equity holding | 1 | RM20,000 |
A pure equity holding company is relieved from part of this test by an exemption order of 2020 (P.U.(A) 177/2020). It must meet control and management conditions: one board meeting in Labuan a year, a registered office and resident secretary in Labuan, and records and minutes kept there. We confirm the exact test for each holding structure before incorporation.
Substance is tested for every basis period. A shortfall in one year means 24% on that year's chargeable profits. If a planned activity matches no listed category, we check its treatment before you incorporate. Labuan FSA publishes the Substance Regulations 2021 in full.
Labuan Holding Companies
A holding company is non-trading when it only holds investments, such as shares, securities, loans or deposits, on its own behalf (s.9). Three points keep it at 0%:
- Stay non-trading. Management is a trading activity under s.2(1), so a holding company that also provides management services is treated as a trading company (s.2(2)).
- Meet the holding test. Pure equity holding must at least meet the control and management conditions. We confirm per structure, before incorporation, whether it must also spend a minimum in Labuan. Other investment holding needs the staff and spending in the substance table.
- Separate royalties. IP income stays under the Income Tax Act 1967 even in a non-trading company (s.9(2), (3)).
Treaty relief needs a certificate of residence, which under s.3B requires management and control in Malaysia. LHDN issues it through the e-Residence portal within 10 working days of a complete application. The file includes board minutes, a director's letter confirming management and control in Malaysia, Forms 25 and 27, and non-citizen directors' passport and travel records.
A Kuala Lumpur office for a Labuan holding company
With Labuan FSA approval, a Labuan holding company may run an operational and management office in Kuala Lumpur, under the Guidelines on Co-location of Labuan Holding Company. Permitted work covers holding investments, management services to related companies in Malaysia or any companies abroad, group treasury and credit, and trading or invoicing outside Malaysia. Management services and trading are trading activities under s.2(1), so we confirm how that work affects the company's non-trading status before the office opens.
Visas and Work Permits
No director has to live in Labuan: the resident director may reside anywhere in the world, and the secretary is a trust officer. Two rules still bring people to Labuan. A pure equity holding company holds a board meeting there once a year, and other activities need full-time employees in Labuan. For foreign hires we check the work pass route before fixing the substance plan; the Employment Pass process for a Sdn Bhd is on our Malaysia page.
Banking for Labuan Companies
A Labuan company may open foreign currency accounts in Labuan or abroad, in its own name. Bank Negara Malaysia deems every Labuan entity a non-resident, so ringgit dealings follow its non-resident rules. Ringgit business is not banned. The 2022 amendment deleted the old s.7(4) ban, with effect deemed from 1 January 2019. Bank introductions run through our bank account opening service.
Compliance and Reporting Obligations
| Filing or duty | Statutory basis | When |
|---|---|---|
| Annual return | LCA s.109(3) | Each calendar year, at least 30 days before the incorporation anniversary |
| Accounting records | s.110 | Kept in Labuan; entries within 90 days of each transaction |
| Accounts laid before members | s.111(1) | Within nine months of the date they are made up to |
| Change of auditor | s.114(4) | Notice within 30 days |
| Beneficial ownership changes | Part VA (ss.109A to 109F) | Lodged with Labuan FSA within 30 days |
| LBATA tax return | LBATA ss.5, 10 | Within seven months after the accounting period closes |
| Resident secretary vacancy | s.93 | Filled within 30 days, or the company is deemed struck off |
The accounts are followed by a director's solvency certificate (s.111(1A)) and an approved auditor's certificate (s.111(2A)), each within 30 days. Budget for a yearly audit.
Beneficial owners are the natural persons who own or control the company, in whole or in part, or exercise effective control as Labuan FSA determines. The Act sets no fixed percentage. The register stays at the registered office, former owners' entries are kept for six years, and the resident secretary is responsible for compliance.
Nominee position. Labuan law recognises shares held by a trust company as nominee or on trust. Part VA still requires the natural persons behind them to be recorded as beneficial owners. We do not provide nominee shareholders or nominee directors.
Public register. Labuan FSA's free REEFS company search shows company particulars and status by exact name or registration number.
Forming a Labuan Company as a Non-Resident
Non-residents of Malaysia form Labuan companies on the same footing as Malaysians, with no nationality limit on shareholders. Despite its name, the resident director can be a non-resident individual living anywhere, or a trust officer of a Labuan trust company. The trust company files with Labuan FSA, provides the resident secretary and can host the registered office, so a non-resident owner works through it.
The company is itself a non-resident for exchange control, because Bank Negara Malaysia deems every Labuan entity non-resident. It may still trade with Malaysian residents and deal in ringgit, and it can hold foreign currency accounts in Labuan or abroad.
Two points need planning from abroad. Most substance minimums require staff and spending in Labuan. A pure equity holding company must at least hold its yearly board meeting and keep its records in Labuan, and we confirm its full test per structure. A certificate of residence for treaty claims requires management and control in Malaysia.
Frequently Asked Questions
Does a Labuan company need a local director?
It needs a resident director, who need not be local. Since the 2022 amendment to s.87, at least one director must be a natural person: a Labuan trust officer, or an adult of almost any nationality living anywhere. Agent pages saying that no resident director or resident secretary is needed, or that a corporate director suffices, are out of date.
How is the 3% Labuan tax calculated?
As 3% of chargeable profits, which LBATA defines as the net profits in the audited accounts (s.4). No ceiling applies, because the old fixed-sum option in s.7 has been deleted, so claims of a capped annual tax are wrong. The rate holds only while the substance minimum set for the activity is met; otherwise that year's profits bear 24%. Where none is set, we confirm the treatment before incorporation.
Can a Labuan company do business in Malaysia?
Yes, with Malaysian residents. Section 7(2) of the Labuan Companies Act 1990 permits that business, and the duty to notify Labuan FSA of such deals was deleted in 2022. Malaysian payers, however, lose the deduction on 97% of ordinary payments and 25% of interest or lease rental, and exchange control treats the company as non-resident.
Can a Labuan company use ringgit?
Yes, for business and for share capital. The 2022 amendment deleted the ban on carrying on business in ringgit, with effect deemed from 1 January 2019, and ringgit dealings follow Bank Negara Malaysia's non-resident rules. Since the 2025 amendment, share values may be stated in any currency, ringgit included. Labuan FSA's own FAQ page still excludes ringgit share values and is out of date.
Does a Labuan company need an audit?
Plan for one every year. Section 113 of the Labuan Companies Act does not by itself oblige every company to appoint an auditor, but s.111(2A) calls for an approved auditor's certificate. LBATA returns of trading and non-trading companies both rest on audited accounts. Claims that only companies choosing 3% need an audit are wrong: 3% is not an election.
How long does Labuan company formation take?
Official processing is short: Labuan FSA approves names within 24 hours and incorporations within 24 hours of a complete file, 1 working day in its client charter. The trust company's due diligence comes first, and its length depends on the owners, the directors and the documents each trust company asks for. We prepare that file with you before anything is lodged.
What drives the budget for a Labuan company?
Mostly the substance plan: the staff, annual spending and board meetings in Labuan that the activity's substance test requires. Next come the trust company's services as secretary and registered office, the annual audit, banking and due diligence on each owner and director. The written quote lists each item.
Should I choose a Labuan company or a Malaysian Sdn Bhd?
Choose by where your customers are. A Sdn Bhd more than 20% foreign-owned pays 24% and counts as a resident for exchange control, which suits selling inside Malaysia. A Labuan trading company pays 3% when it meets the substance minimum set for its activity. Malaysian customers, though, cannot deduct 97% of ordinary payments to it. Our company formation in Malaysia guide covers the Sdn Bhd.
Get Started: Form Your Labuan Company
Tell us what the company will do, who will own it and where its people will work. We confirm the trading or non-trading treatment and the substance plan, then file through a licensed Labuan trust company. Call +48 2222 5 2222 or email info@companyformation24.com to start.
Content prepared by Aleksandra Kowalska, Corporate Client Service. Approved by Tomasz Bielski, Managing Director.
