Why Set Up in Labuan? Enjoy a 3% Tax Rate and Exceptional Banking Access

Setting up your business in Labuan International Business and Financial Centre (Labuan IBFC) offers significant advantages—most notably, a low corporate tax rate of 3% and streamlined access to world-class banking services.

Regulated under Item 20 of the First Schedule of Labuan’s business activity regulations, Labuan provides a competitive platform for companies delivering a wide range of professional and corporate support services.

Whether you're offering administrative, legal, accounting, or management services, Labuan’s pro-business environment ensures regulatory efficiency, tax savings, and banking flexibility that few offshore jurisdictions can match.

Enjoy a 3% Corporate Tax Rate in Labuan

One of the most compelling reasons to incorporate in Labuan is its low-tax regime. Companies engaged in Labuan business activities—as defined under Regulation Item 20—are eligible for a 3% tax rate on net profits, provided two key substance requirements are met:

• At least two full-time employees must be based in Labuan (average salary between 1,000 and 1,800 USD per month gross)

• Minimum annual operational expenses of MYR 50,000 (approx. USD 10,500) must be incurred in Labuan

Failing to meet these requirements? Your company can still operate, but will be taxed at Malaysia's standard corporate rate of 24%—a missed opportunity compared to the highly attractive 3% rate.

Robust Banking Access Without Exchange Controls

Labuan is home to more than 50 banks, including major international financial institutions, offering:

• Multi-currency corporate bank accounts

• No foreign exchange controls

• Efficient cross-border transaction capabilities

• Digital banking services with high security standards

This makes Labuan an ideal jurisdiction for companies providing services like payroll processing, back-office support, and financial planning, which require seamless movement of funds and global banking access.

Eligible Business Activities under Regulation Item 20

Companies offering any of the following services may qualify for the 3% tax rate:

1. Administrative Services

Includes HR, payroll, property management, financial planning, and contract administration.

2. Accounting Services

Covers financial recording, analysis, classification, and reporting of business transactions.

3. Legal Services

From advisory and conveyancing to litigation and dispute resolution, including alternative methods like mediation.

4. Backroom Processing Services

Essential support functions including compliance, record keeping, IT, and settlements.

5. Payroll Services

Manage employee remuneration, tax deductions, benefits, and statutory payments.

6. Talent Management

Employee recruitment, development, and retention services.

7. Agency Services

Providing services on behalf of another entity under an agency arrangement.

8. Insolvency Services

Handling corporate winding up, liquidation, or personal bankruptcy proceedings.

9. Management Services

Strategic planning and operational oversight of business resources.

Why Businesses Choose Labuan

• Reputable jurisdiction backed by Malaysia’s regulatory infrastructure

• No withholding tax on dividends and interest paid outside Malaysia

• Easy company formation and straightforward compliance

• Flexible corporate structures, including Labuan holding companies and service providers

• Strong data privacy and asset protection frameworks

Ready to Benefit from Labuan’s 3% Tax Regime?

Whether you're a professional services firm or a global enterprise outsourcing operations, Labuan offers substantial tax advantages, regulatory credibility, and world-class banking—making it one of Asia's most business-friendly jurisdictions.

Contact Zitadelle AG today for expert guidance on setting up your Labuan entity, fulfilling substance requirements, and accessing premium banking solutions tailored to your business.