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Taxation in Labuan

A Labuan company with Labuan trading activity may choose to pay 3% tax of its chargeable profits with their accounts audited. On the other hand, a Labuan company may also opt for a flat tax rate of RM20,000 per annum, unaudited.

Labuan companies carrying out non-trading / investment holding activities (holding of investments in securities, stock, shares, loans, deposits or any other properties by a Labuan entity on its own behalf) and the investment income arising from a Labuan non-trading activity is not subject to tax. There is no capital gains tax in Labuan IBFC.

Payment of royalties, interests, service fees, technical or management fees and other gains or profits / dividends by a Labuan company to a non-resident person or another Labuan company are exempted from income tax and thus, not subject to withholding tax.

Non-citizen directors are tax exempted from the directors’ fee received.

There are no indirect taxes (such as sales taxes, service taxes and custom duties) since Labuan has the benefit of free port status.

Stamp duty is exempted on all instruments executed by a Labuan entity in connection with a Labuan business activity, on its constituent documents and on transfer of shares in a Labuan company.