DOING BUSINESS

IN

04/2019 shinewingtyteoh.com

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About Labuan

Summary of Quick Facts

Location 8km off the coast from the state of , East , on the island of .

Land Area 92 sq. km.

Time Zone GMT + 8 Hours.

Climate Tropical weather with an average 30℃.

Population 95,500 comprising of a mix of (50%),Chinese (40%), Indians and the indigenous people of Sabah & , .

Language Malay is the national language but English is commonly spoken.

Currency Malaysian Ringgit (MYR).

Legal System English Common law, British Legal System.

Constitution Parliamentary democracy.

Economic Sector Oil and Gas, Business and Financial Services.

Accessibility Several daily flights to Kuala Lumpur and with connection to USA, Europe, Asia and Australia.

Labuan Companies

Businesses in Labuan are regulated by modern Acts. These Acts enhance its competitiveness in the offering of financial product and services. Labuan IBFC also adheres to international standards and best practices including anti money laundering and exchange information set by the Organisation of Economic Cooperation and Development. Acts which govern the businesses in Labuan as follows:-

a. Labuan Business Activity Tax Act 1990 (“LBATA”) b. Amendment to the Labuan Business Activity Tax Act (Finance Bill 2018) c. Labuan Companies Act 1990 d. Labuan Trusts Act 1996 e. Labuan Financial Services Authority Act 1996 f. Labuan Financial Services and Securities Act 2010 g. Labuan Islamic Financial Services and Securities Act 2010 h. Labuan Foundation Act 2010 i. Labuan Limited Partnerships and Limited Liability partnerships Act 2010

Labuan companies can trade in any currencies with any countries.

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Labuan Companies Characteristics

Company Name

I. Under the Labuan Companies Act 1990, the name of the company may have the word “ (L) “ as part of its name and shall also have the word:

a) “Bhd” or “Berhad”, where the company name shall in addition have the word “(L)” or “(Labuan)”; b) “Corporation” or “Corp”; c) “Incorporated” or “Inc”; d) “Limited” or “Ltd”; e) “Public Limited Company” or “PLC”; f) “Societe Anonyme” or “Sociedad Anonima” or “S.A”; g) “Aktiengesellschaft” or the abbreviation “A.G”; h) “Naamloze Vennootscap” or the abbreviation “N.V”; i) “Perseroan Terbatas” or the abbreviation “P.T”.

II. The words “Royal”, “Bank”, “Finance”, “Fund” or “Trust” shall be avoided, except for specific business activities which required the corresponding licence(s).

Share Capital

a. Share capital can be held in any currencies. b. No par value and treasury shares are allowed.

Shareholder

At least one (1) shareholder who can be either individual or corporate.

Director(s)

a. At least one (1) Director who can be either individual or corporate. b. The Director(s) can be either a non-resident or resident of Malaysia.

Company Secretary

The company must have a resident secretary which can be either individual or corporate.

Registered Office

The company must have a registered office in Labuan.

Annual Return

An annual must be filed not later than 30 days from the anniversary of the date of its incorporation.

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Maintain Proper Accounting Records

Yes.

Audit

The Labuan company is subject to audit.

Tax Return

Tax return must be filed within a periods of three (3) months.

Business Registration

An annual government fee is payable within 30 days immediate after the anniversary date of its incorporation.

Labuan Taxable Activities

Taxation

With effect from 1 Jan 2019, under Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulation 2018, a Labuan company carrying on a Labuan business activity is only subject to tax at the rate of 3% of net profit PROVIDED that it has fulfilled the requirement of the number of full time employees and an amount of annual operating expenditures as specified in the Schedule below:

Labuan Company Carrying on a Labuan Business Activity Minimum Number of Full Minimum Amount of Time Employees in Annual Operating Labuan Expenditure in Labuan RM

1. Labuan Insurer, Labuan reinsurer, Labuan takaful operator or Labuan retakaful operator 4 150,000

2. Labuan underwriting manager or Labuan underwriting takaful manager 4 100,000 3. Labuan insurance manager or Labuan takaful manager 4 100,000 4. Labuan insurance broker or Labuan takaful broker 4 100,000 5. Labuan captive insurer or Labuan captive takaful 4 100,000 6. Labuan International Commodity Trading Company 3 3,000,000 7. Labuan bank, Labuan investment bank, Labuan Islamic bank or Labuan Islamic investment bank 3 180,000

8. Labuan trust company 3 120,000 9. Labuan leasing company or Labuan Islamic leasing company 2 100,000

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10. Labuan credit token company or Labuan Islamic credit token company 2 100,000

11. Labuan development finance company or Labuan Islamic development finance company 2 100,000

12. Labuan building credit company or Labuan Islamic factoring company 2 100,000

13. Labuan factoring company or Labuan Islamic factoring company 2 100,000

14. Labuan money broker or Labuan Islamic factoring company 2 100,000 15. Labuan fund manager 2 100,000 16. Labuan securities licensee or Labuan Islamic securities license 2 100,000

17. Labuan fund administrator 2 100,000 18. Labuan company management 2 100,000 19. Labuan International Financial Exchange 2 120,000 20. Self-regulatory organisation or Islamic self-regulation organisation 2 120,000 21. Holding company 2 50,000

Income derived from intellectual property rights is subject to tax at the rate of 24% under the Income Tax Acts (“ITA”).

With effect from 1 Jan 2019, under Income Tax (Deductions Not Allowed for Payment Made to Labuan Company by Resident) Rules 2018, the following type of payments made to a Labuan company by a company resident in Malaysia are not entitled to a tax deduction:

Type of payment Amount not allowed for deduction 1. Interest payment 33% 2. Lease rental 33% 3. Other payments 97%

Tax Exemption

The source of income is exempted from income tax as follows:-

a. Dividend paid out of the income derived from the Labuan Business Activities is not subject to tax.

b. Interest or technical and management fee paid by a Labuan company to a non-resident person or a resident person or another Labuan company is not subject to withholding tax.

Tax Incentives (until to Year of Assessment 2020) a. Tax exemption on Director fees received by a non-citizen individual in his capacity as a Director of a Labuan company. b. Tax exemption on 50% of gross income received by a non-citizen individual from exercising employment in Labuan with Labuan company in managerial function in Labuan or at its marketing or co-located offices approved by Labuan Financial Services Authority.

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c. Tax exemption on 50% of gross housing and Labuan territory allowances received by Malaysian citizen from exercising employment in Labuan with a Labuan company.

Stamp Duty Exemption

The following activities are exempted from stamp duty:- a. All Memorandum and Articles of Association of a Labuan company. b. All instrument executed by a Labuan company in connection with a Labuan business activities, including transfer of shares in a Labuan company.

Double Taxation Agreements

Malaysia has entered into Double Taxation Agreements with various countries as follows:-

Albania, Republic Germany Mongolia South Africa Argentina ^ Hong Kong Morocco Spain Australia Hungary Myanmar Slovak Republic Austria India Namibia Sri Lanka Bahrain Netherlands Sudan Bangladesh Ireland New Zealand Sweden Belgium Islamic Republic of Iran Norway Switzerland Bosnia & Herzegovina * Italy Pakistan Syria Japan Papua New Guinea Taiwan # Canada Jordan Philippines Chile Kazakhstan Poland Turkey China, People’s Republic Korea, Republic Qatar Turkmenistan Croatia Kuwait Romania United Arab Emirates Czech Republic Kyrgyz, Republic Russia Denmark Laos San Marino United States of America ^ Egypt Lebanon Saudi Arabia Uzbekistan Fiji Luxemburg Senegal * Venezuela Finland Malta Seychelles Vietnam France Mauritius Zimbabwe*

* Gazette Double Taxation Agreements. ^ Limited Agreements. # Income Tax Exemption Order

Currently, Labuan has been specifically excluded from Double Taxation Agreement with the countries as follows:-

Australia Japan South Africa Seychelles Chile Luxembourg Spain United Kingdom Indonesia Netherlands Sweden

Copy Rights @ ShineWing TY TEOH. This publication contains information in summary form and is therefore intended for general guidance only. No person should rely on the contents of the aforesaid publication without first obtaining advice from a qualified professional person. ShineWing TY TEOH is not responsible for the results of any actions taken on the basis of information neither in this publication, nor for any error in or omission from this publication. ShineWing TY TEOH expressly disclaims all and any liability and responsibility to any person, whether a reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication.

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About ShineWing TY TEOH

ShineWing TY TEOH is a leading regional chartered accountants, tax, transfer pricing, valuation and consulting group with office presences in Malaysia to provide a diverse spectrum of business solutions and consulting services to the corporate client including Audit & Assurance, BPO & Business Advisory, Cambodia Advisory, China Desk, Financial & Transaction Advisory, Migration Advisory, Myanmar Advisory, Offshore Advisory, Profit Improvement, Risk & Governance Advisory, Sustainability Advisory, Tax Advisory, Transfer Pricing Advisory and Valuation Advisory.

 Member firm of ShineWing International and Praxity;

 Registered Auditor of Public Company Accounting Oversight Board (PCAOB), USA;

 Approved Auditor of Labuan Financial Services Authority (Labuan FSA), Malaysia;

 Member of Quantera Global, transfer pricing specialist.

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