Labuan Company Registration in 2025 - Full Guide by Zitadelle AG (Operational & Holding Structures)

Introduction

Labuan, a federal territory of Malaysia, has become a prominent midshore financial centre under the Labuan International Business and Financial Centre (Labuan IBFC). Thanks to its flexible regulatory framework, favorable tax regime, and strategic location in Southeast Asia, it is an increasingly attractive jurisdiction for international holding companies, trading businesses, fintech, commodity trading, and other cross-border operations. Zitadelle AG’s guide below walks you through everything you need to know to establish a Labuan company in 2025 - from setup requirements, taxation, substance, and specialized licensed activities.

Why Choose Labuan for Your Company Structure

1. Tax Efficiency

   • Labuan companies may elect to pay tax under the Labuan Business Activity Tax Act (LBATA):

     • Trading companies: either 3% of audited net profits, or a fixed tax (depending on structure).

     • Non-trading (holding) companies: 0% tax on certain passive income.

   • No withholding tax on dividends, interest, or royalties for non-residents.

   • Labuan also benefits from Malaysia’s network of double tax treaties (DTAs), making it attractive for international structures.

2. Substance & Substance Requirements

   • To benefit from favorable tax treatment, Labuan companies often have economic substance requirements: a minimum number of full-time employees in Labuan and a certain level of annual operating expenditure.

   • A registered office in Labuan is mandatory, via a licensed Labuan trust company that also acts as the resident secretary.

3. Corporate Structure Flexibility

   • A Labuan company must have at least one director.

   • There is no minimum share capital requirement; shares may be denominated in any currency (except Malaysian Ringgit in some contexts).

   • Companies may issue different classes of shares.

   • Labuan companies can hold controlling stakes in Malaysian domestic companies.

4. Confidentiality

   • Information on shareholders, management, and business transactions of a Labuan company is not publicly disclosed by the registrar, giving a level of privacy.

5. Regulatory Clarity & Licensing Options

   • Labuan IBFC is regulated by the Labuan Financial Services Authority (Labuan FSA).

   • For certain business lines (insurance, fund management, leasing, commodity trading, etc.), a Labuan license must be obtained under the appropriate legislation (e.g., under the Labuan Financial Services and Securities Act).

   • For example, the GIFT (Global Incentives for Trading) Program permits Labuan companies to do commodity trading under a specific LITC license.

   • There is also provision for company management businesses under LFSSA, which require certain minimum capital, licensing, and regulatory criteria.

6. Strategic Geographic Location

   • Labuan’s location in Southeast Asia offers a gateway to major markets in ASEAN, China, and beyond.

   • Currency neutrality: companies can conduct business in currencies other than Malaysian Ringgit, subject to conditions.

Step-by-Step Guide to Incorporation in Labuan

1. Engage a Licensed Trust Company

   • You must appoint a Labuan trust company to serve as your incorporation agent. This agent provides the registered office, resident secretary, and handles the secretarial duties.

   • The trust company will perform KYC / due diligence on the prospective directors/shareholders, as required by Labuan FSA.

2. Company Name Reservation

   • Apply for name reservation through Labuan FSA via the COR@L system (the online corporate registry).

   • The naming guidelines include: acceptance or rejection by the Registrar, ability to use non-English names (with English certified version), etc.

   • The fee for name reservation is around USD 15.

   • Name reservation holds for 3 months once approved.

3. Prepare Incorporation Documents

   • You need to submit:

     • Memorandum & Articles of Association

     • Statutory declaration of compliance from the trust company

     • Consent to act as director(s)

     • Director/shareholder information (KYC)

   • The registered office must be in Labuan (through the trust company).

   • Share capital: no minimum, but you will need at least 1 share.

4. Pay Government Fees

   • Incorporation fees vary based on paid-up capital:

     • Up to RM 50,000: USD 300

     • RM 50,000 - RM 1 million: USD 600

     • Above RM 1 million: USD 1,500

   • Annual fee for a Labuan company: USD 800.

5. Meet Substance / Economic Activity Requirements

   • To access favorable LBATA tax rates, maintain economic substance: have full-time employees in Labuan, and incur a minimum operating expenditure.

   • Maintain audited accounts; these are needed for tax filing.

6. Licensing (if needed)

   • If your business is a specialized financial business (e.g., fund management, insurance, leasing, etc.), apply for the relevant Labuan license with FSA.

   • For commodity trading, you may apply for an LITC license under the GIFT program.

   • For company-management businesses, comply with LFSSA requirements; minimum paid-up capital, security deposit, licensed director, etc.

7. Annual Compliance

   • Once incorporated, file audited financial statements (where required), pay the annual fee (USD 800), and maintain the required economic substance.

   • Regulatory reporting depends on whether you have a license or not, and what type of business you conduct.

Use Cases: When to Use a Labuan Company

• Holding / Investment Vehicle
  Use Labuan to hold investments (stocks, real estate, intellectual property), benefitting from 0% LBATA for non-trading income, assuming substance is met.

• International Trading Company
  For cross-border trading (commodities, goods), a Labuan company can elect the 3% tax rate or fixed tax, and access the GIFT program for commodity-specific businesses.

• Fintech / Fund Management
  If regulated activities (funds, asset management, fintech), you can apply for the relevant Labuan license. The regulatory regime is modern and internationally recognized.

• Company Management / SPV / Captive
  Labuan supports company management business, but that requires licensing. It is also suitable for special purpose vehicles (SPVs) or captive insurance structures.

Risks, Considerations & Regulatory Trends

• Economic Substance Scrutiny
  Substance requirements are increasingly enforced. Entities need to ensure real operations in Labuan, not just shell presence.

• Regulatory Cost
  For licensed activities, licensing fees, capital requirements, and ongoing compliance can be significant.

• Tax Election
  Companies must carefully choose between LBATA and electing to be taxed under Malaysia’s Income Tax Act (ITA) if that is more beneficial.

• Reputation / Substance Risk
  As Labuan is often used as an offshore jurisdiction, careful planning is required to ensure structures are substance-justified and defensible.

• GIFT Program Specifics
  For commodity traders under the GIFT Programme (LITC), there are detailed operational requirements (capital, business plan, substance) to satisfy.

• Regulator’s Discretion
  Labuan FSA plays an active role in approving names, licensing, and substance, so working closely with a trusted incorporation partner is essential.

Why Work with Zitadelle AG for Labuan Incorporation

• Expertise in Midshore & Offshore Structures
  We design operational or holding structures in Labuan that maximize tax efficiency while meeting substance requirements.

• Regulatory Compliance
  We support clients in preparing licensing applications (if needed), due diligence documentation, financial projections, and substance plans that meet Labuan FSA standards.

• Ongoing Support
  Beyond incorporation, Zitadelle AG offers corporate secretarial services, annual compliance, auditing coordination, and substance maintenance.

• Cross-Jurisdiction Strategy
  We integrate Labuan entities into larger international structures to optimize tax, regulatory, and operational efficiency.

Conclusion

Labuan IBFC remains a powerful jurisdiction for international businesses in 2025. With its tax-favorable regime, flexible corporate laws, and robust regulatory framework, it is well-suited for holding companies, trading operations, fintech, and more. However, to fully benefit, companies must plan for substance, compliance, and potential licensing.

If you are considering forming a Labuan entity, Zitadelle AG can assist you at every step - from incorporation to substance planning and regulatory compliance.