Labuan Company Formation

Labuan is a federal territory of Malaysia and its international business and financial centre. A Labuan company is formed under the Labuan Companies Act 1990 (Act 441) and supervised by the Labuan Financial Services Authority (Labuan FSA). Tax is a separate statute, the Labuan Business Activity Tax Act 1990 (LBATA, Act 445), which the Inland Revenue Board of Malaysia administers. A company that does business in, from or through Labuan can be owned by non-residents, and it can trade, but it is not a postbox: it needs a Labuan trust company, a resident secretary, a registered office in Labuan and a natural-person resident director.

Three rules shape the whole page. First, incorporation must go through a licensed Labuan trust company, which carries out due diligence on you before anything is filed. You cannot register directly. Second, the rate of 3% on trading profit is conditional: it applies to audited net profit, and only if the company meets the staff and spending conditions in Labuan. Third, the MYR 20,000 fixed-tax election that many provider pages still advertise no longer exists. Section 7 of LBATA, which carried it, was deleted by the Finance Act 2018 from 1 January 2019. The sections on tax and annual duties and substance give the current rules.

We coordinate the file with a licensed Labuan trust company and tell you what it and the Labuan FSA will ask for before anything is submitted. We are a facilitator, not a law firm and not a regulator, and we can arrange nominee directors and nominee shareholders where Labuan law allows them and the trust company accepts them, with a Nominee Declaration Form. The Labuan FSA's own page says a trust company may hold shares as nominee, and any such arrangement runs through the trust company. If you are still choosing a jurisdiction, the company formation hub sets them side by side, and the pages for Seychelles, the Cayman Islands and the Marshall Islands cover alternatives with a different cost and substance profile. Our general Labuan overview covers the territory itself.

If your plan is a licensed crypto or digital-finance business, a company is only the first step: the Labuan FSA must approve the activity, and our Labuan crypto licence page covers that route. This page deals with the company and the partnership.

A note on the legal text. The Companies Act on the Labuan FSA site is a reprint as at 1 September 2012. The changes of 2022 (Act A1653) and 2025 (Act A1756) are published as separate Acts, and we read all three together. The Labuan FSA company page shows a '1996' next to the Act's name. That is not the Act's year: the Act's own short title says 1990. The tax text we read is the Attorney General's Chambers update as at 1 January 2026, which is marked as not an authentic text until reprinted, so we confirm the current wording before any filing.

A Labuan entity that carries on a Labuan business activity is charged tax under LBATA. A Labuan company, LP and LLP are all Labuan entities. For trading activity the rate is 3% of chargeable profits, which are the net profits as reflected in the audited accounts (section 4). 'Trading activity' is wide: the Act says it includes banking, insurance, trading, management, licensing or any other activity that is not a non-trading activity. A company that sells goods or services pays 3%, not nil. Royalty and other intellectual-property income is excluded from this rate and falls under the Income Tax Act 1967.

Non-trading activity is holding investments in securities, stock, shares, loans, deposits or other property situated in Labuan on the entity's own behalf. Profit from it is not charged to tax under the Act (section 9), and a return is still filed. An entity that does both is treated as trading. The Labuan FSA's own sentence is that the rate is 3% of audited net profit for trading and zero for non-trading, provided the entity complies with the substantial-activity requirements. An activity that is not a Labuan business activity is taxed under the Income Tax Act 1967 (section 2(3)).

The MYR 20,000 election is gone. Older guides say a Labuan company can choose to pay a fixed MYR 20,000 instead of 3%. Section 7 of LBATA, which carried it, is marked deleted by the Finance Act 2018, with effect from 1 January 2019. The only election left is section 3A: an irrevocable choice to be taxed under the Income Tax Act 1967 instead, made within three months of the start of the basis period. If a provider quotes you the fixed amount, ask which section of the current Act it relies on.

If the substance conditions are not met, the profit is charged at 24% (section 2B), on net profit in the audited accounts. The next section explains the conditions. Two other rules matter for planning. A Labuan entity whose business is managed and controlled in Malaysia is treated as resident in Malaysia for treaty purposes (section 3B). And a Labuan entity in a group with annual revenue of EUR 750 million or more falls under the Domestic and Multinational Top-up Tax (section 3(2)). The Labuan FSA says Labuan entities may use Malaysia's double-tax agreements, but we have not verified the conditions and we do not promise treaty access.

The 3% is a Labuan tax, not an answer to tax elsewhere. The owner's country may tax the owner on the company's profit under controlled-foreign-company or similar rules, and a company managed from another country may be taxed there as well. Labuan does not change your tax residence. We do not give tax advice: take it in the country where the owners and decision-makers are based before you commit.

The yearly cycle has more moving parts than the fee suggests. From the Act and the regulator's pages:

Labuan has no separate economic substance Act. The rule sits inside the tax law: LBATA section 2B and the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 (P.U.(A) 423/2021). The statute requires an adequate number of full-time employees and adequate annual operating expenditure in Labuan, and for non-trading activity also conditions on control and management. Fail them and the 24% rate applies.

The regulations set numbers by type of entity, not one number for everyone. Examples from the trading schedule: a Labuan money broker needs 2 full-time staff and RM 100,000 of annual operating spend in Labuan, a trust company 3 staff and RM 120,000, and the schedule's catch-all for administrative, accounting, legal, payroll, agency and similar services (item 20) 2 staff and RM 50,000. For non-trading holding, an investment holding other than pure equity holding needs 1 member of staff and RM 20,000, and pure equity holding needs RM 20,000 of spend with the staff requirement exempted under a 2020 order. Control and management conditions for a pure equity holding company include a board meeting in Labuan at least once a year, a registered office and secretary in Labuan, and records kept in Labuan.

There is no row for an ordinary trading company. We found no regulation that sets a number for a company that sells goods, or for consulting that is not within item 20. The statute still says 'adequate'. So this page does not print a generic figure such as two staff and RM 50,000 for every company, because that would be a guess. Before you plan around 3%, we ask the trust company what it applies to your activity, and where it matters we put the question to the Labuan FSA or the Inland Revenue Board.

No separate notification regime for substance turned up in what we read. Substance shows up in the annual return of profits and the audited accounts. Staff from outside Malaysia need work permits, and the Labuan FSA fee schedule lists USD 500 for a work permit application by a Labuan entity. We have not researched the immigration rules.

That is the difference between a Labuan company and a mailbox company. The company has a Labuan registered office, a resident secretary from a trust company, a natural-person resident director, records kept in Labuan and, for the tax rate, people and spending there. If you want 3% on trading profit with nobody in Labuan, the rules we read do not offer it.

The public search is narrow. The Labuan FSA offers a free search of the status and existence of a company, and you must enter the exact entity name or the registration number to get a result. We could not confirm which fields the search displays. The Companies Act (section 149) is also a secrecy provision: anyone with access to a company's records must not disclose them, with exceptions such as court orders, supervisory functions and the tax Act.

Privacy from the public is not privacy from the regulator. Since the 2025 amendment, Part VA of the Companies Act requires every Labuan company to keep a register of beneficial owners at its registered office, with name, address, nationality, identity details, residence and the dates a person became and ceased to be a beneficial owner. The regulator's guidance uses a reference threshold of 25% of shares or voting rights, or the right to appoint or remove a majority of the board, or effective control. Records of former beneficial owners are kept for six years.

The first filing is due within 30 days of incorporation. After that the entity files annually, on or before 31 January, and within 30 days of any change, through the trust company. The register is not public: the guidelines give access to the Authority, to the beneficial owner named in it, to anyone that owner authorises, and to law enforcement and financial institutions on request. We found no rule giving the general public access.

The penalties are real. False, misleading or inaccurate information to the Authority is punishable by a fine of up to RM 1 million or imprisonment for up to three years, or both. A beneficial owner who fails to notify within 30 days faces a fine of RM 50,000. The resident secretary must see that the company complies. We do not state when the 2025 amendment came into operation, because the published text leaves the commencement date blank; the Labuan FSA's guidelines took effect on 10 October 2025 and the filing guidance note on 1 July 2026.

A nominee is not a beneficial owner. If a nominee holds shares, the entity must say so on a nominee declaration and name the person behind it. Vantegris can arrange nominee shareholders where the trust company accepts them, but the declaration still names the person behind the nominee, so the Labuan FSA sees the owner.

The Labuan FSA says a Labuan company can open foreign accounts with any bank in Labuan or outside it, and that the account name must be the Labuan company's name. It also says operations with non-residents are free of exchange control. That is a statement about what the law permits, not about what a bank will approve. We found no bank-by-bank policy and no approval statistic, and we do not quote one.

Providers commonly say that opening the account is the harder step than forming the company, and that a ringgit corporate account is generally not available to a Labuan company. Those are marketing statements, so treat them as a warning rather than a fact. Banks look at who owns the company, where it is managed, what it will do and how it is staffed, which is why the substance position above matters for banking as well as tax.

Labuan banks and Labuan money brokers are licensed businesses in their own right. Do not confuse them with an ordinary company account. For gaming and crypto companies our working position is an account with an electronic money institution or neobank, and we do not promise one. For any other company, the banking route is confirmed in the quote. Our pages on high-risk merchant accounts, gaming company bank accounts and crypto-friendly banking explain what providers ask for and why applications fail.

We do not state an EU or FATF listing status for Malaysia on this page, because we could not read the Council's or the FATF's own pages. We check both at engagement.

Yes, if the business is Labuan financial business. Under the Labuan Financial Services and Securities Act 2010 (section 87), no one may carry on Labuan banking, investment banking or Labuan financial business unless it is a Labuan company or foreign Labuan company holding a valid licence, or a Malaysian bank with one. Labuan financial business covers, among other things, credit and leasing, factoring and money-broking. Trust company business and insurance business are also licensed. The penalty in section 87 is a fine of up to RM 10 million or five years' imprisonment, or both. A company formed for a licensed activity needs the Labuan FSA's approval before incorporation, not after.

For digital financial services the Labuan FSA says entities must obtain its prior approval before undertaking the proposed activity. The Client Charter lists 30 working days, or 15 with fast track, for a money-broker, payment-system or trust-company licence application. That is the regulator's review time from a complete application, not the time to prepare the file, find the staff and set up the office. Our Labuan crypto licence page and the article on the Labuan DFS licence cover that route, and we do not repeat their capital or fee figures here.

On gambling we have not researched Labuan or Malaysian law, so this page makes no statement about it, and we do not offer a Labuan gaming licence. If you need a licensed gaming structure, our applicant company for Anjouan, Tobique, Tuvalu, Kahnawake and KUNAISA licences is in Costa Rica and the payment agent for gambling structures is in Cyprus; the article on setting up a company in Costa Rica explains that structure.

Provider pages tend to sell Labuan as a tax-free, low-effort offshore box. The statutes say otherwise. Check each claim against the rule behind it.