Labuan International Company

Incorporate Your Labuan International Offshore Company

for Global Trade & Wealth Holding

Establish an international business entity under the Labuan Financial Services Authority (Labuan FSA). Ideal for cross-border trade, regional holding structures, software licensing, asset leasing, and digital services. Enjoy 100% foreign ownership, access to international trade corridors, and attractive tax regimes (3% on trading net profit or 0% for holding entities) backed by complete Economic Substance and statutory compliance management.

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Top-Rated Corporate Services Group in Malaysia (4.9/5.0 Stars with 119+ Verified Google Reviews)

100% Transparent, itemized package pricing with zero hidden charges. Upfront substance feasibility check, capital planning, and trust company secretarial retainers.

24-Hour Same-Day Reply Guarantee & Complete Ground Coordination across Peninsular (West) Malaysia and Sabah & Sarawak (East Malaysia).

Key Differences

Labuan International Company vs. Mainland Sdn Bhd

Instead of setting up a new Malaysian private limited company (Sdn Bhd), foreign parent entities choose these structures for specific commercial reasons:

Comparison Criteria

Labuan International Company (LC)

Mainland Malaysian Company (Sdn Bhd)

Governing Authority

Labuan Financial Services Authority (Labuan FSA)

Companies Commission of Malaysia (SSM)

Corporate Income Tax

3% on audited net profit (Trading) or 0% (Pure Equity Holding) with Substance

15% to 24% standard corporate income tax

Foreign Equity Ownership

100% foreign equity allowed across all approved international sectors

100% allowed, but distributive trade requires RM 1,000,000 capital & WRT license

Resident Director Requirement

No local Malaysian director required (foreign directors permitted)

Mandatory at least 1 resident director residing in Malaysia

Operational Currency

Operates in foreign currencies (USD, EUR, SGD, etc.); no foreign exchange controls

Primarily Malaysian Ringgit (MYR) with local banking rules

Economic Substance (ESR)

Mandatory: Local full-time employee(s) & local operating expenditure in Labuan

General operational requirements (tenancy, local premise license)

Target Market

Global international clients, cross-border trading & investment holding

Local Malaysian domestic market and domestic trade

Restricted, Non-Permitted & Non-Qualifying Business Activities

Under the Labuan Companies Act 1990, the Labuan Business Activity Tax Act 1990 (LBATA), and Labuan FSA guidelines, certain activities are strictly prohibited, require specialized secondary licenses, or are excluded from preferential tax rates:

Restriction Category

Representative Office (RO)

Foreign Branch Office

Strictly Prohibited Activities

Physical retail shops, food catering, or walk-in consumer counters operating directly in mainland Malaysia.
Illegal financial schemes, unlicensed multi-level marketing (MLM), or gambling/betting operations.
Any transactions carried out in physical cash.

Strictly illegal under Malaysian legislation; results in immediate license revocation and severe statutory penalties.

Regulated Financial Activities (Special License Required)

Offshore Banking & Investment Banking
Insurance, Reinsurance & Captive Insurance
Fund Management & Public/Private Fund Administration
Digital Asset Trading (Crypto Exchanges) & Money Broking
Trust Company Services

Requires formal prior approval, specialized license application, and higher statutory paid-up capital from Labuan FSA before commencing operations.

Non-Qualifying Activities (Subject to 24% Normal Tax)

Intellectual Property (IP) Income: Royalty or licensing revenue derived from patents, trademarks, or copyrights.
Activities not listed under the 2018 Substance Regulations Order.
Entities failing to satisfy annual Economic Substance Requirements (ESR).

Income is excluded from the 3% preferential rate and will be taxed under standard Malaysian Income Tax at 24%.

Economic Substance Requirements (ESR)

Labuan Trading Entities (International Trade, Consulting, Digital Services, Management)

Employees: Maintain a minimum number of full-time, fit-and-proper employees physically based in Labuan (typically 2 employees for general trading/services).
Annual Operating Expenditure: Incur a minimum annual operating expenditure of RM 50,000 to RM 100,000+ physically spent within Labuan (covering office rent, staff salaries, audit fees, utilities).
Core Activities: Core income-generating activities must be managed and conducted in or from Labuan.

Labuan Non-Trading Entities (Pure Equity Holding Companies)

Employees: Exempt from local full-time employee requirements.
Annual Operating Expenditure: Incur a minimum annual operating expenditure of RM 20,000 in Labuan.
Board Governance: Hold at least one formal board meeting in Labuan annually.

Non-Compliance Warning

If an entity fails to fulfill statutory economic substance requirements for a given financial year, its net profit will be taxed at the standard mainland rate of 24% under Malaysian tax law.

Mandatory Yearly Compliance Requirements

Annual Trust & Secretarial Retainer

Maintain a licensed Labuan Trust Company as statutory resident secretary and registered office in Labuan.

Annual Return & FSA Fee

Lodge the Annual Return and pay the mandatory annual license fee to the Labuan Financial Services Authority (Labuan FSA).

Statutory Financial Audit

Annual statutory audit by an approved Labuan auditor for all active trading and holding companies.

Tax Filing (Form LE1 / LE2)

File the annual Labuan business tax return with the Inland Revenue Board of Malaysia (LHDN) by the statutory deadline.

Substance Declaration Reporting

Submit the annual Economic Substance Compliance declaration verifying local employee payroll and Labuan expenditure records.

Beneficial Ownership (BO) Maintenance

Maintain and update the internal register of ultimate beneficial owners owning 20% or more equity.

The Zepheus Advantage

Why Choose Zepheus for Labuan Corporate Structuring?

1

International Multi-Currency Banking

Coordinating remote and in-person corporate bank account opening with premier Labuan offshore banks and Malaysian commercial banking divisions.

2

Transparent Milestone Pricing

4.9-Star Google Rating across 119+ verified reviews. Clear itemized proposals covering government lodgments, trust fees, registered office facilities, and audit retainers.

3

Licensed Trust Company Partnership

Direct integration with authorized Labuan Trust Companies for name approvals, company incorporation, and resident secretary representation.

4

Complete Economic Substance Planning

Gap assessment and turnkey execution for your substance obligations: Labuan office facility arrangements, local payroll administration, and FSA annual compliance reporting.

5

Sole SME Firm with True Dual-Region Presence

The only SME corporate advisory firm with direct operational capability across both Peninsular (West) Malaysia and Sabah & Sarawak (East Malaysia), providing direct proximity and coordination for Labuan setups and Borneo banking corridors.

Document Checklist

Required Documents for Foreign Investors

Individual Shareholders & Directors: High-resolution passport copy, certified residential address proof (utility bill/bank statement dated within 3 months), bank reference letter, and detailed CV/resume.

Corporate Shareholders (Parent Companies): Certified Certificate of Incorporation, Constitution/Articles of Association, Register of Directors and Members, Group Ownership Chart, and Board Resolution authorizing Labuan incorporation.

Due Diligence Compliance: Standalone Beneficial Ownership (BO) declaration and Source of Funds (SOF) declaration with supporting bank records.

Detailed Business Plan: Summary of proposed business activities, estimated annual revenue, client countries, and projected Labuan operating expenses.

Step-by-Step Incorporation Workflow

Step 1

Entity & Substance Assessment

Evaluating whether trading, holding, or digital service activity matches Labuan tax and substance guidelines.

Step 2

Name Reservation & Labuan FSA Due Diligence

Securing name reservation and completing statutory KYC screening via licensed Labuan Trust Company channels.

Step 3

Statutory Documentation & Lodgment

Executing Memorandum and Articles of Association, consent forms, and BO/SOF declarations for formal lodgment with Labuan FSA.

Step 4

Certificate of Incorporation Issuance

Receiving official Certificate of Incorporation from Labuan FSA within 24 to 48 hours of full dossier clearance.

Step 5

Corporate Multi-Currency Bank Account Opening

Compiling certified true copies and scheduling bank onboarding for multi-currency operational accounts.

Step 6

Substance Implementation & Yearly Retainer

Setting up Labuan office address, payroll for substance staff, and managing annual FSA returns, audits, and tax submissions.

Frequently Asked Questions

Clear answers to common questions about incorporating and running your Malaysian business digitally with Zepheus.

What business activities are strictly prohibited for a Labuan International Company?

A Labuan company cannot operate physical retail shops, walk-in consumer stores, or food catering businesses directly in mainland Malaysia, cannot handle physical cash transactions, and cannot engage in illegal financial schemes or unlicensed gambling activities.

What activities require special licensing from Labuan FSA before operating?

Specialized financial activities—such as offshore banking, insurance/reinsurance, fund management, money broking, crypto/digital asset exchanges, and trust company services—require prior regulatory approval, specialized licenses, and higher statutory capital requirements from Labuan FSA.

What is Intellectual Property (IP) income, and why is it restricted in Labuan?

Under international tax standards (BEPS compliance), income derived from intellectual property rights (such as royalties, software patents, trademarks, or copyrights) is excluded from the 3% preferential tax regime and is taxed at Malaysia's standard 24% income tax rate.

Can a Labuan company trade with mainland Malaysian residents?

Yes. A Labuan company is legally permitted to trade with Malaysian resident companies and individuals, provided transactions comply with Labuan FSA guidelines and are properly declared in annual financial audits and tax filings.

What is the tax rate for a Labuan International Company?

Qualifying trading activities are taxed at 3% of audited net profits, while pure equity-holding companies pay 0% corporate tax, provided the entity satisfies statutory Economic Substance Requirements (ESR).

Does a Labuan company require a local Malaysian resident director?

No. A Labuan company can be 100% foreign-owned and only requires a minimum of one director, who can be a foreign non-resident individual or corporate entity. However, the company must appoint a licensed Labuan Trust Company as its resident secretary.

What are the Economic Substance Requirements (ESR)?

ESR requires trading companies to maintain full-time employees physically in Labuan (typically 2 persons) and spend a minimum annual operating expenditure (e.g., RM 50,000 to RM 100,000) in Labuan. Pure equity holding companies require RM 20,000 annual expenditure. Failing ESR results in a 24% tax rate.

Can a Labuan company open corporate bank accounts in Malaysia and overseas?

Yes. A Labuan company can open multi-currency corporate bank accounts with Labuan offshore banks, Malaysian commercial banks (in foreign currency accounts), or international financial institutions globally.

Can a Labuan company sponsor expatriate work visas?

Yes. An active Labuan company that meets regulatory criteria and maintains physical substance can apply for 2-year renewable Labuan Work Permits for foreign directors and managers under Labuan Immigration guidelines.

How long does it take to incorporate a Labuan company?

Once all due diligence checks, passport verifications, and statutory forms are completed, the Labuan FSA typically approves registration within 1 to 3 working days.

DISCLAIMER: The information, tax rates, economic substance guidelines, and statutory procedures outlined above are intended for general reference purposes only. Labuan business activities and tax incentives are governed under the Labuan Companies Act 1990, the Labuan Business Activity Tax Act 1990 (LBATA), and regulations issued by the Labuan Financial Services Authority (Labuan FSA) and the Inland Revenue Board of Malaysia (LHDN), and are subject to amendments without prior notice. Preferential tax treatment is contingent upon fulfilling full statutory Economic Substance Requirements. Final incorporation approvals and tax assessments remain under the sole discretion of the relevant authorities.

Preferential Tax & Offshore Structuring

Structure Global Trading, Wealth & Regional Treasury under a 3% Preferential Tax Regime.

Incorporate your international business entity under the Labuan Financial Services Authority (Labuan FSA). Benefit from 3% audited net profit taxation, multi-currency banking, and 100% foreign ownership.

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