Labuan Investment Holding Company Tax

Let us have a look at the tax profile of a Labuan investment holding company. The definition of holding company for Labuan substantial activity requirements is based on the Organisation for Economic Co-operation and Developments Holding Company definition under the Base Erosion Profit Shifting Action 5 2015 Final Report on Countering Harmful Tax Practices More Effectively Taking into Account Transparency and Substance.

Malaysia Company Tax Code Information Malaysia Tax Regulations

The account has to be audited and file to the local IRB annually.

Labuan investment holding company tax. 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. Labuan holding company is subject to 0 tax zero tax Labuan licensed company is subject to 3 tax Malaysia Double Taxation Agreement DTA protects your income from being taxed twice. No foreign exchange control.

Labuan is a whitelist and tax compliant jurisdiction. As you are aware the Labuan Business Activity Tax Requirements for Labuan Business Activity Regulations 2018 Regulations were gazetted on 31 December 2018 and introduced new requirements for Labuan entities which are subjected to the Labuan tax. Setting up the Labuan Investment Holding Company in Malaysia is fairly easy with a minimum of one Director and Shareholder both being the same individual or a legal entity while you are in full compliance by submitting your annual Management Account for non-trading activities.

The financial year for the company ended 31st December which due to submit by 31st March extendable to 31st May each year. A 177 gazetted on 2 June 2020 legislates one of the clarifications. Labuan company that dealt with Malaysia residents individual or corporate that have opted to be taxed under the Malaysia onshore Income Tax Act 1967 with a tax rate of 24 on net profit.

One of the most important characteristics of the taxation for companies in Labuan is the fact that the principles are differentiated according to the activity of the company. The regulations are unclear on whether non-trading income such as dividends received by an investment holding company in Labuan from a foreign subsidiary is exempt from tax or would be taxed at 24 under the LBATA if the Labuan entity fails to meet the substance requirements for a YA. Such an entity would not require full-time employees in Labuan.

Allowed to have multiple currency bank accounts. Although Labuan is a federal territory within Malaysia there are preferential tax treatments for companies conducting Labuan business activities such as low fixed tax rate of 3 withholding tax exemption on payments to non-residents tax exemption on fees paid to non-. Although Labuan Investment Holding attracts no tax each year the company has to file the tax return.

The Order provides that a pure equity holding Labuan entity is exempted from the application of Section 2B1bi of the Labuan Business Activity Tax Act 1990 LBATA - ie. Therefore for the YA 2020 basis period ending in the year 2019 pure equity holding companies only need to comply with the substance. Zero tax on holding assets and properties.

Such companies will not come within the provisions of the principal Companies Act 1965 which governs companies operating in Malaysia domestically. In order for Labuan company to avail for Labuan IBFC tax incentive. 21 Labuan Companies The Labuan Companies Act 1990 LCA provides for the incorporation registration and administration of Labuan and foreign Labuan companies in Labuan.

The Labuan Business Activity Tax Exemption Order 2020 PU. 50 tax rebate on personal income. No GST or sales tax on international business activities.

The Labuan Business Activity Tax Exemption Order 2020 PUA 1772020 has been gazetted to exempt pure equity holding companies of having an adequate number of full-time employees in Labuan. Occasional stocks holding will be 0 tax on its capital gain. No withholding tax on dividends royalty fees management account etc.

For example an investment holding company can be tax exempt while a trading company can choose between two different taxation options. Able to invest in. Equity holding company in recognition of the difficulties of holding companies in achieving the substantial activity requirements of 2 FTE and RM50000 operating expenditure under the Labuan Business Activity Tax Requirements for Labuan Business Activity Regulations 2018 refer to.

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