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Malaysian offshore center with 3% flat tax option
Region
ASIA PACIFIC
Corporate Tax
3%
Setup Time
2 weeks
Currency
USD
Labuan, a federal territory off Malaysian Borneo, operates as Malaysia's designated offshore financial center. The territory's company registration framework and tax regime support specific business setup strategies within Malaysian sovereignty.
With a population of 100,000, Labuan offers modest island living with Malaysian character. Malay and English are used, with English common in financial services. The tropical climate is consistently warm and humid.
Healthcare is limited, with serious cases requiring travel to mainland Malaysia. Safety is good. The cost of living is low. The island provides basic amenities but limited entertainment.
Few expatriates choose Labuan for lifestyle; it serves primarily as a legal domicile.
Labuan companies conducting trading activities pay tax at 3% of net profit or fixed RM 20,000. Non-trading (holding) companies can achieve tax exemption. This preferential regime operates separately from Malaysian domestic taxation.
The Malaysian ringgit is the functional currency, with multi-currency operations permitted. Labuan IBFC (International Business and Financial Centre) promotes the territory for holding companies, trading, and Islamic finance.
Company registration through Labuan FSA is efficient. Labuan Companies and Labuan Limited Partnerships serve different purposes. Foreign ownership is permitted.
Company formation completes within 1-2 weeks. Minimum capital varies by structure. At least one director is required. Substance requirements apply to benefit from preferential tax treatment.
Labuan FSA licenses digital asset exchanges and related activities. The crypto license framework has attracted digital asset businesses seeking Asian regulated status.
Labuan does not offer gambling licensing. Malaysia generally prohibits gambling under Islamic principles for Muslims, with limited exceptions.
Substance requirements mean Labuan is not suitable for pure shell companies. The territory's reputation requires legitimate business purpose. Geographic accessibility requires travel through Kuala Lumpur.
Banking access is available through Labuan-licensed banks. Professional services are developed for offshore structures.
Labuan suits holding companies, trading operations, and crypto businesses seeking Asian-regulated status with tax efficiency for their business setup.
Local: Ltd
Local: Ltd
Local: Foundation
Local: Trust
| Corporate Tax Rate | 3% |
| Personal Income Tax Rate | 0% |
| VAT / Sales Tax | 0% |
| Capital Gains Tax | 0% |
| Withholding Tax | 0% |
| Reduced Corporate Tax Available | Yes |
| Non-Resident Withholding Exempt | Yes |
| Tax Treaty Network | Yes |
| Banking Access | HIGH |
| Financial Privacy | HIGH |
| Currency Controls | NONE |
| Local Bank Account Required | No |
| Non-Resident Bank Account Allowed | Yes |
| Physical Presence for Banking | No |
| Banks Restrictive (High Risk) | No |
| AML Officer Required | Yes |
| MLRO Required | Yes |
| Compliance Officer Required | Yes |
| Data Protection Officer Required | No |
| Bookkeeping Frequency | Annual |
| Local Bookkeeping Required | Yes |
| Mandatory Audit | Yes |
| License Required | Yes |
| Local Director Required | Yes |
| Local AML Director Required | Yes |
| Local Legal Address Required | Yes |
| Local Physical Office Required | Yes |
| Required Share Capital | $500,000 |
| Capital Maintained in Account | Yes |
| Compliance Program Required | Yes |
| Travel Rule Compliance | FATF compliant |
| Business Plan Required | Detailed business plan with operational procedures, AML/CFT policies, risk management framework, and technology security measures required |
| Personnel Required | Minimum 2 directors, AML/Compliance Officer, fit and proper full-time employees physically in Labuan |
| Insurance Required | No |
| Remote Incorporation Possible | Yes |
| 100% Foreign Ownership | Yes |
| Min. Shareholders | 1 |
| Min. Directors | 2 |
| Shareholder/Director Same Person | Yes |
| Registry Public | No |
| Registry Access | Basic company status through REEFS at Labuan FSA COR@L system |
| Renewal Period | Annual |
| Accounting Filing Required | Yes |
| Accounting Filing Frequency | Annual |
| Financial Statement Required | Yes |
| Financial Statement Frequency | Annual |
| Accounting Audit Mandatory | Yes |
| Compliance Audit Mandatory | Yes |
| Technical Audit Mandatory | Yes |
| Corporate Income Tax Applicable | Yes |
| Dividend Tax Applicable | No |
| Capital Gains Tax Applicable | No |
| Territorial Tax Regime | No |
| VAT Applicable | No |
| Regulators | Labuan Financial Services Authority (Labuan FSA) |
| Licensing Fee | $5,000 |
| Licensing Fee Details | Application fee approximately USD 5,000. Annual license fee varies by activity type. Digital Financial Services provider license. |
| Permitted Business Models | Digital Asset Exchange, Cryptocurrency Exchange, Digital Wallet Provider, Blockchain Services |
| Permitted Activities | Crypto exchange, digital asset custody, electronic money transfers, cryptocurrency trading, token issuance (subject to approval) |
| Restricted Activities | Services to Malaysian residents have restrictions. Must comply with FATF guidelines and AML/KYC requirements. |
| Cross-Border Service Allowed | Yes |
| Physical Inspection Required | No |
| Derivatives Allowed | No |
| RWA Tokenization Allowed | No |
| App Store Listing Allowed | Yes |
| Crypto Custody Allowed | Yes |
All gambling activities are prohibited under Malaysian law including Common Gaming Houses Act 1953 and Betting Act 1953. Sharia law prohibits gambling for Muslim citizens.
| License Required | Yes |
| Local Director Required | Yes |
| Local AML Director Required | Yes |
| Local Legal Address Required | Yes |
| Local Physical Office Required | Yes |
| Required Share Capital | $500,000 |
| Capital Maintained in Account | Yes |
| Compliance Program Required | Yes |
| Travel Rule Compliance | FATF compliant |
| Business Plan Required | Comprehensive 3-year business plan with financial projections, operational procedures, and risk management framework |
| Personnel Required | Minimum 2 directors with relevant experience, qualified personnel with 3+ years industry experience, resident secretary, AML/Compliance Officer |
| Insurance Required | Yes |
| Insurance Details | Professional indemnity insurance required for certain financial services activities |
| Remote Incorporation Possible | Yes |
| 100% Foreign Ownership | Yes |
| Min. Shareholders | 1 |
| Min. Directors | 2 |
| Shareholder/Director Same Person | Yes |
| Registry Public | No |
| Registry Access | Licensed institutions listed on Labuan FSA Financial Institutions Directory |
| Renewal Period | Annual |
| Accounting Filing Required | Yes |
| Accounting Filing Frequency | Annual |
| Financial Statement Required | Yes |
| Financial Statement Frequency | Semi-Annual |
| Accounting Audit Mandatory | Yes |
| Compliance Audit Mandatory | Yes |
| Technical Audit Mandatory | No |
| Corporate Income Tax Applicable | Yes |
| Dividend Tax Applicable | No |
| Capital Gains Tax Applicable | No |
| Territorial Tax Regime | No |
| VAT Applicable | No |
| Regulators | Labuan Financial Services Authority (Labuan FSA) |
| Licensing Fee | $10,000 |
| Licensing Fee Details | Application fee USD 5,000-10,000 depending on license type. Annual license fees vary: Payment System Operator USD 13,000, Money Broking USD 7,500, Fund Management USD 10,000. Security deposit may also be required. |
| Permitted Business Models | Payment System Operator, Money Broking, Investment Banking, Fund Management, Leasing, Factoring, Insurance/Takaful Brokering |
| Permitted Activities | Electronic payments, remittance, money broking, fund administration, credit facilities, leasing, factoring, insurance brokerage |
| Restricted Activities | Deposit-taking (restricted to licensed banks). Investment banks cannot accept deposits. Transactions with Malaysian residents require specific approvals. |
| Cross-Border Service Allowed | Yes |
| Physical Inspection Required | No |