Description
Figure 1
Labuan Non-Trading Activity Holding of investments in securities , stock , shares , loans , deposits or any other properties situated in Labuan and held by a Labuan entity on its own behalf
Labuan Trading Activity Includes banking , insurance , trading , management , shipping operations , licensing or any other activity which is not a Labuan non-trading activity
Carrying out both Labuan Trading and Non-trading activities - Deemed to be Labuan Trading Activity
Tax Treatment
Not subject to tax
3 % of net profits per audited accounts
Same tax treatment as Labuan Trading activity , i . e . 3 % of net profits per audited accounts
Non-Labuan Business Activities Tax under Malaysia Tax Act 1967
Should a Labuan company or structure prefer not to be taxed under LBATA , it may make an irrevocable election to be taxed under the Income Tax Act 1967 ( ITA ). The Malaysian Inland Revenue Board has issued guidelines on the tax treatment ( including compliance requirements ) for Labuan entities that elect to be taxed under the ITA . The advance ruling provisions provided by the Inland Revenue Board is also available to Labuan entities under LBATA .
LABUAN COMPANIES OPERATING IN MALAYSIA
A Labuan company may apply to Labuan FSA to establish marketing offices anywhere in Malaysia to carry out its marketing activities without losing its Labuan business activity status .
Labuan banks and Labuan insurance companies , subject to Labuan FSA ’ s approval and conditions , may also set up co-located offices in any part of Malaysia to carry out permissible Labuan business activities . A Labuan holding company may apply to Labuan FSA to co-locate its operational and management office in Kuala Lumpur , provided it makes an irrevocable election to be taxed under the ITA instead of LBATA .
The co-located office is allowed to provide management services , management of surplus funds and provision of credit facilities , and trading or invoicing activities . Depending on the nature of the activities , the services can be extended to related companies in and outside of Malaysia and to non-related companies outside of Malaysia .
DOUBLE TAXATION AGREEMENTS
Malaysian tax-paying residents have access to an extensive double taxation agreement ( DTA ) network , which contributes to a dynamic and conducive business environment . Labuan entities with Malaysian tax residency status
77