• CCS

Guidelines on Prescribed Labuan Business Activities for Non-Licensed Trading Entities in the LIBFC

Updated: Aug 25


The Labuan business activity comprises trading and non-trading trading activities.


Section 2B of the Labuan Business Activity Tax Act 1990 (LBATA) provides that a Labuan entity carrying on a Labuan business activity must comply with specific substance requirements to benefit from the 3% preferential tax rate:-

  1. To employ an adequate number (ranging from two to four, depending on the type of activity) of full-time employees in Labuan;

  2. To incur an adequate amount of annual operating expenditure (ranging from RM50,000 to RM3 million depending on the type of activity) in Labuan; and

  3. Any condition about control and management in Labuan (in relation to Labuan non-trading activity only, effective from 1 January 2021).

The Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 [P.U. (A) 423/2021], which has revoked Regulations 2018, specify the minimum number of full-time employees and annual operating expenditure in respect of a Labuan entity carrying on a Labuan trading activity and Labuan non-trading activity in Schedule 1 and Schedule 2, respectively.


126
.8 Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations
Download 8 LABUAN BUSINESS ACTIVITY TAX (REQUIREMENTS FOR LABUAN BUSINESS ACTIVITY) REGULATIONS • 539KB

The required minimum number of full-time employees and annual operating expenditures for the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 remain the same compared to Regulations 2018; the only change is the addition of a new category (item 20) for Labuan entities that engage in certain business activities, which are detailed below:

  • administrative services

  • accounting services

  • legal services

  • backroom processing services

  • payroll services

  • talent management services

  • agency services

  • insolvency related services

  • management services other than Labuan company management.

These requirements under Regulations 2021 come into effect retrospectively from 1 January 2019.


Labuan entities that do not meet the substance requirements are taxed at 24% of their chargeable profits for the YA.

According to section 2B(1B), the term "chargeable profits" is defined as "shall be net profits as reflected in the audited accounts in respect of such Labuan business activity..." This would include capital gains and other forms of income that would otherwise be exempt from taxation under the ITA, such as foreign sourced income, dividends, unrealised profits or gains, etc. [Such businesses might, in theory, opt to be taxed according to the ITA rather than the LBATA, as this is permitted by section 3A of the LBATA] 
Guidelines on Prescribed Labuan Business Activities for Non-Licensed Trading Entities in the Labuan International Business and Financial Centre (LIBFC)

In light of those above, the Labuan Financial Services Authority (LFSA) issued, on the 24th of January 2022, the Guidelines on Prescribed Labuan Business Activities for Non-Licensed Trading Entities in LIBFC.


126
.7 Labuan FSA - Guidelines on Prescribed Labuan Business Activities for Non-Licensed Tr
Download 7 LABUAN FSA - GUIDELINES ON PRESCRIBED LABUAN BUSINESS ACTIVITIES FOR NON-LICENSED TR • 152KB

These Guidelines are issued under section 4A of the Labuan Financial Services Authority Act 1996 (LFSAA) to clarify the Labuan business activities as prescribed in item 20 of the First Schedule of the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 [P.U.(A) 423/2021] (Regulation).


126.9 Labuan Financial Services Authority Act 1996
.pdf
Download PDF • 685KB

Any Labuan financial institution defined in Section 2(1) of the Labuan Financial Services Authority Act 1996 that engages in any Labuan business activity prescribed in Item 20 of the First Schedule of the Regulations is subject to the Guidelines.



Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Any reliance on such information is therefore strictly at your own risk.

Keep in touch with us so that you can receive timely updates |

要获得即时更新,请与我们保持联系

1. Website ✍️ https://www.ccs-co.com/ 2. Telegram ✍️ http://bit.ly/YourAuditor 3. Facebook ✍

4. Blog ✍ https://lnkd.in/e-Pu8_G 5. Google ✍ https://lnkd.in/ehZE6mxy


6. LinkedIn ✍ https://www.linkedin.com/company/74734209/admin/

63 views0 comments