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The Federal Territory of Labuan comprises seven small islands of which Pulau Labuan is the largest. Labuan lies off the north-west coast of Borneo and not far from Brunei Darulssalam. At its nearest point, Labuan is only some ten kilometres off the coast of the East Malaysian State of Sabah. It is located on the major shipping and air routes of the Asian region, being centrally located, it is roughly equidistant from the major cities of Bangkok, Hong Kong, Jakarta, Kuala Lumpur, Manila and Singapore. It is a free port where no sales tax, surtax, excises or import and export duties are levied. Labuan is connected to Kuala Lumpur by daily return flights; flying time is approximately two and a half hours. Additionally there are several daily flights to the international airport at Kota Kinabalu, the capital of Sabah. Labuan can also be accessed via a short flight from Brunei's international airport. Labuan’s new airport terminal and runway was upgraded during 1999.
Labuan has a tropical climate, which is warm and humid throughout the year. Daytime temperatures average 30°C with two seasonal monsoon periods stretching from April to June and from September to December.
POPULATION
The Island of Labuan covers an area of approximately 92 sq. km, and has an estimated population of 50,000.
POLITICAL STRUCTURE
The Federal Territory of Labuan is part of Malaysia and responsibility for its administration falls directly under the Prime Minister’s Department. Malaysia is a multi-racial and multi-religious nation consisting of 13 States (11 states in Peninsula Malaya and 2 states in the Borneo Island) and two Federal Territories (which are the capital, Kuala Lumpur, and Labuan. Parts of it were formerly under British control, but it obtained independence on 31 August 1957. On 16th September 1963, Malaysia was formed with the joining of Sabah, Sarawak and Singapore (Singapore left Malaysia in 1965). Malaysia is a member of the British Commonwealth.
INFRASTRUCTURE AND ECONOMY
The form of Government is a Constitutional Monarchy with the King as Head of State. The Nation is economically strong and politically stable. Labuan has modern office space and telecommunication facilities. More than 50 of the world’s top banks have branches in Labuan.
LANGUAGE
The official language is Bahasa Malaysia. However, English is widely spoken and many documents and publications are available in English.
CURRENCY
The Malaysian currency is the Ringgit. Apart from certain exceptions, offshore companies in Labuan are required to carry on business in a foreign currency.
EXCHANGE CONTROL
Labuan Offshore Companies are treated as non-resident for the purposes of the Exchange Control Act 1953.
TYPE OF LAW
The Malaysian legal system is based on the English model. Special laws applicable to the offshore industry in Labuan have been enacted. Arbitration is permitted. Disputes are heard in camera. Final appeal lies with the Supreme Court.
PRINCIPAL CORPORATE LEGISLATION
On 6th November 1989, the Government of Malaysia declared the Federal Territory of Labuan as an International Offshore Financial Centre. The following statutes apply:
The Offshore Companies Act 1990
The Labuan Trust Companies Act 1990
The Offshore Banking Act 1990
The Offshore Insurance Act 1990
The Labuan Offshore Business Activity Tax Act 1990
The Labuan Offshore Trusts Act 1996
The Labuan Offshore Limited Partnerships Act 1997
The Labuan Offshore Security Industry Act 1997
In addition, the Labuan Offshore Financial Services Authority (LOFSA) has been established as the sole regulatory body for those statutes.
COMPANY INFORMATION:
TYPE OF COMPANY FOR INTERNATIONAL TRADE AND INVESTMENT
Offshore Company.
PROCEDURE TO INCORPORATE
Submission to the Registry of the Memorandum and Articles of Association, consent to act as a director form, Statutory Declaration of Compliance and the requisite fee.
RESTRICTIONS ON TRADING:
PERMITTED TRADING OF AN OFFSHORE COMPANY
An Offshore Company shall only carry on business in, from or through Labuan. An Offshore Company may not: carry on business with a resident of Malaysia except as permitted by the Offshore Banking Act 1990; carry on the business of Banking or Insurance or such similar business unless it is licensed so to do under the Offshore Banking Act 1990 or the Offshore Insurance Act 1990; carry on business in the Malaysian currency except for defraying its administrative and statutory expenses; carry on business of shipping or petroleum operations in Malaysia or carry on business as a trust company.
EXCEPTIONS TO CARRYING ON BUSINESS WITH RESIDENTS OF MALAYSIA.
An Offshore Company is not treated as carrying on business with residents of Malaysia if it makes or maintains deposits with a person carrying on business in Malaysia; it makes contact with professional advisers carrying on business in Malaysia; it prepares and maintains books and records in Malaysia; it acquires or holds any lease or property for operational purposes or accommodation of its employees; it holds directors’ or members’ meetings within Malaysia; it holds shares, debt obligations, or other securities in a company incorporated under the Offshore Companies Act 1990 or in a domestic company, or holds shares, debts obligations or other securities for the purposes of a transaction entered into in the ordinary course of a money-lending business.
POWERS OF COMPANY
A company incorporated in Labuan has the same powers as a natural person.
LANGUAGE OF LEGISLATION AND CORPORATE DOCUMENTS
English.
SHELF COMPANIES AVAILABLE
No.
TIME TO INCORPORATE
Five days.
NAME RESTRICTIONS
Names resembling the name of a company incorporated or registered under the Companies Act 1965 are not acceptable. Names which in the opinion of the Registrar suggest royal or government patronage. Names, which the Registrar considers undesirable, will be rejected.
LANGUAGE OF NAME
Offshore companies are allowed to have named in a foreign language, provided they use the Latin alphabet.
NAMES REQUIRING CONSENT OR LICENCE
Bank, building society, insurance, assurance, reinsurance, fund management, investment fund, trust, trustees, Chamber of Commerce, university, municipal or their foreign language equivalents.
SUFFIXES TO DENOTE LIMITED LIABILITY
Corporation, Incorporated, Limited, Sociètè Anonyme or Sociedad Anonima or the relevant abbreviations. If the Malaysian word Berhad is used then it must be preceded by "(L)" to denote that the company is incorporated in Labuan.
DISCLOSURE OF BENEFICIAL OWNERSHIP TO AUTHORITIES
No.
COMPLIANCE:
AUTHORISED AND ISSUED SHARE CAPITAL
The standard authorised capital is US$ 10,000; divided in to 10,000 shares of US$ 1. The minimum issued capital is one share, which may be fully or partly paid.
CLASSES OF SHARES PERMITTED
Registered shares of par value, preference shares, redeemable shares and shares with no voting rights.
BEARER SHARES PERMITTED
No.
TAXATION
Offshore Companies that are trading pay 3% on net audited profits or the sum of RM 20,000. Offshore Companies that do not trade do not pay tax.
DOUBLE TAXATION AGREEMENTS
Labuan, being a region of Malaysia, is party to over forty double tax agreements. The countries include: Albania, Australia, Austria, Bangladesh, Belgium, Canada, China, Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Indonesia, Italy, Japan, Korea, Malta, Mauritius, Mongolia, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Romania, Saudi Arabia, Soviet Union, Singapore, Sri Lanka, Sudan, Sweden, Switzerland, Thailand, Turkey, UAE, UK, Vietnam, Yugoslavia and Zimbabwe.
LICENCE FEES
RM 2,600 per annum.
FINANCIAL STATEMENT REQUIREMENTS
A set of accounting records must be kept in Labuan. Non-trading (i.e. investment and holding companies) and trading companies which elect to pay tax of RM 20,000 p.a. are not required to file financial statements.
Such companies are exempt from appointing an auditor if they are not a licensed offshore bank or insurance company, did not invite the public to subscribe for shares or debentures or to deposit money with or lend money to the company and the members of the company have resolved that no auditor be appointed.
A trading company, which pays 3% of audited net profits, is required to appoint an auditor and file audited financial statements.
DIRECTORS
The minimum number of directors is one. Corporate directors are allowed. Directors may be of any nationality and need not be resident in Labuan or Malaysia.
COMPANY SECRETARY
A Labuan company must have a resident company secretary, who must either be an officer or a subsidiary of a licensed Labuan trust company. Additional company secretaries, who need not be Malaysian resident, may be appointed.
