9. About Labuan Taxation

Trading Activity is a transaction that does Buy & Sell. In this case, 3% will be taxed and must be audited.

Non Trading Activity is a transaction that does not do Buy & Sell (Buy & Hold). In this case, there is no tax and no audit is required.

Considered as Trading Activity and subject to tax.

The tax rate (24%) specified in the Malaysian Income Tax Act 1967 applies.

The tax rate (24%) specified in the Malaysian Income Tax Act 1967 applies.

Businesses that provide qualified professional services to Labuan companies (entities) are legal, accounting, financial, auditing, secretarial services, etc., and 65% of the statutory income obtained from qualified professional services is exempt from tax.

"Payments from the following residents to Labuan companies are not deductible under the Malaysian Income Tax Act 1967.

・ Interest expense – 33% non-deductible (only 67% is deductible)
・ Lease fee – 33% non-deductible (only 67% is deductible)
・ Other payments – 97% non-deductible (only 3% deductible)

Labuan business activities are business or non-business transactions conducted on Labuan Island or through Labuan entities, excluding activities that violate the law.

Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 (the "Rules") are required to meet the requirements for full-time minimum number of employees and minimum annual cost in Labuan.

By regulations, entities that are not listed as Labuan entities or do not meet the required requirements are considered not doing Labuan business activities and are subject to the Malaysian Income Tax Act 1967.

* General Labuan companies do not hold licenses are not covered by the above.

Kindly refer to the following site for questions and answers (FSA official version) for the Labuan corporate tax revision.

https://www.labuanibfc.com/clients/Labuan_IBFC_78C2FF81-703A-4CAA-8926-A348A3C91057/contentms/img/Downloads/guideline/general/Frequently%20Asked%20Questions%20-%20New%20LBATA%20(Substantial%20Activity%20Requirements)_%202019.pdf

With the revision of the Labuan Corporate Tax, new regulations have been enacted in the exercise of the authority granted by the Labuan Business Activity Tax Act (Act. 1990) 21 (1), 2B (2) (b).

These regulations were enforced as Labuan Business Activity Tax Law and became effective on January 1, 2019.

Kindly refer to the following site for details of the system associated with the revision of Labuan corporate tax.

https://www.labuanibfc.com/clients/Labuan_IBFC_78C2FF81-703A-4CAA-8926-A348A3C91057/contentms/img/Downloads/legislation/subsidiary-legislation/pua_20190101_PUA%20392.pdf?1547807543

In this case, Labuan entities will not be able to enjoy the LBATA tax incentive (3% tax rate). In other words, it will be taxed under the ITA, and the Malaysian corporation tax system (24%) will apply.

These are costs incurred by the Labuan corporation on Labuan Island (eg invoices and receipts issued in Labuan). This includes payments, professional and statutory fees. (Salaries, lease rentals, service provider fees, license payments to Labuan FSA, etc.).

When conducting securities transactions, taxation methods are divided into 2 categories: "dividend income gain tax" and "capital gain tax".

Kindly refer to the following website for the tax system's view when trading securities such as stocks and bonds under the name of Labuan entity.

https://www.labuan-trust.com/service/labuan_company_incorporation_and_management_service/securities_trading_and_taxation/

When conducting real estate transactions, taxation methods are divided into 2 categories: "dividend income gain tax" and "capital gain tax".

Kindly refer to the following website for the tax system's view when trading securities such as stocks and bonds under the name of Labuan entity.

https://www.labuan-trust.com/service/labuan_company_incorporation_and_management_service/malaysia_real_estate_investment_and_taxation/

The tax treaty is signed with the mainland Malaysia and is applied indirectly to about 80 countries (* Excluded from tax treaties with Australia, Chile, Germany, India, Indonesia, Japan, Luxembourg, Netherlands, South Africa, Spain, Sweden, Seychelles, and the United Kingdom).

It is recommended, as every Labuan Company is obliged to report its tax position with the Inland Revenue Board within three months from the commencement of a year of assessment. If Bona Trust Corporation is not the tax agent, you are required to furnish us details of your tax agent and copies of the filed tax document for our records.

Late tax penalties are accrued 10% every 30 days (max 50%).

Tax evasion penalties are as follows:

First 30 days… 10%
Next 30 days… 15%
Next 30 days… 15% (max 40%)

Income received by individual directors from Malaysia is taxable. In Malaysia, tax is exempted when individual directors earn income from overseas sources. A tax rate of 0% to 30% is applied to residents and a uniform 30% rate is applied to non-residents.

Is possible, kindly refer to the following site and contact us for application for proxy procedures.

Accounting and Administrative Service

In Malaysia's income tax law, regardless of citizenship or nationality, if the number of days in Malaysia is 182 days or more in the previous calendar year will be "tax resident", if the number of days in Malaysia is less than 182 days in the previous calendar year will be "non tax resident".

Director compensation for foreign directors is tax free. However, in the case of a company where such as a sololy shareholder and director type and conducts business, it may be regarded as salary income (taxable). In principle, it is recommended that director compensation be received only when local staff are employed (determined based on real standards).

There is no legal limit on the number of times, however it is better to keep it twice a year.

Dividends to shareholders are treated as tax free.

There is no legal limit on the number of times, however it is better to keep it twice a year.