Labuan, Malaysia (Leasing Business)

GENERAL INFORMATION

Labuan is a leading hub for leasing companies specializing in providing plant and machinery, ships, aircraft, and other specialized equipment, particularly for the oil and gas and aviation industries.

Your company’s focus on Marine Leasing for Oil and Gas positions it to leverage Labuan’s competitive regulatory framework and tax benefits.

PRIOR EXPERIENCE REQUIREMENTS

• Experience:

  • Directors: Must meet the Fit and Proper criteria as specified by Labuan FSA, demonstrating relevant expertise in leasing, financial services, or related fields.

  • Shareholders: Any change in shareholders exceeding 10% ownership requires prior approval from Labuan FSA.

• Track Record:

  • Applicants must provide details of past leasing transactions, financial performance, and operational history to establish credibility in the leasing industry.

• Commitment:

  • Applicants must ensure substantial presence in Labuan by maintaining an operational office and conducting core leasing activities from Labuan.

  • All leasing transactions must be arm’s length and comply with transfer pricing guidelines where applicable.

REPORTING OBLIGATIONS

• Labuan leasing companies must submit:

  • Audited financial statements (one hardcopy & one softcopy) to Labuan FSA within six months after the close of each financial year.

  • Regular statistics and information as required by Labuan FSA for regulatory oversight.

REGULATORY MEETINGS

• Labuan FSA may require meetings to:

  • Review compliance with operational and reporting obligations.

  • Discuss any major changes in business structure (e.g., directors, shareholders, leased assets, or lessees).

LOCAL STAFF REQUIREMENTS

• The company must employ local staff to meet the substance requirements under the Labuan Business Activity Tax Regulations 2018.

• Core functions, such as lease management and financial transactions, must be carried out from Labuan.

APPLICATION FOR LEASING BUSINESS

• Incorporation & Licensing Timeline:

  • Incorporation of a Labuan company under the Labuan Companies Act 1990 is required before applying for a leasing license.

  • Application processing time varies, but fast-track applications may expedite approval.

• Substance Requirements (PUA 423, Paragraph 8)

Labuan leasing companies must comply with substance requirements to qualify for Labuan’s preferential tax regime. Requirements vary based on the number of related Labuan leasing companies:

1. 1–10 Related Leasing Companies:

   • Employees: Minimum of 2 full-time employees for the group.

   • Operating Expenditure: MYR 100,000 per company.

2. 11–20 Related Leasing Companies:

   • Employees: Minimum of 3 full-time employees for the group.

   • Operating Expenditure: MYR 100,000 per company.

3. 21–30 Related Leasing Companies:

   • Employees: Minimum of 4 full-time employees for the group.

   • Operating Expenditure: MYR 100,000 per company.

4. More than 30 Related Leasing Companies:

   • Employees: One additional employee for every increase of 10 related companies.

   • Operating Expenditure: MYR 100,000 per company

COMPANY STRUCTURE

• Shareholders:

  • Changes exceeding 10% ownership require prior approval from Labuan FSA.

• Directors:

  • Must meet Fit and Proper requirements set by Labuan FSA.

  • Any new appointment requires Labuan FSA approval.

OFFICE

• Must maintain a physical operational office in Labuan as part of the substance requirements under the Labuan Business Activity Tax Regulations 2018.

CONFIDENTIALITY

• Companies must adhere to strict confidentiality rules under Labuan IBFC regulations.

• Disclosure of client and business information is restricted except where required by law or regulatory authorities.

OTHER REGULATORY REQUIREMENTS

• Secretary/Resident Agent:

  • Must appoint a licensed Labuan trust company as a registered agent.

• Registered Office:

  • The company must maintain a registered office in Labuan as per Labuan Companies Act 1990.

• Key Staff:

  • Must have sufficient personnel to oversee lease management, compliance, and financial operations in Labuan.

BANK ACCOUNT OPENING

• The company must maintain bank accounts under its name, preferably in Labuan IBFC and/or Malaysia, to facilitate leasing operations and financial transactions.

TAXATION AND EXPENDITURE

• Taxation:

  • Labuan leasing companies are subject to Labuan Business Activity Tax requirements, which may include either:

    • A 3% tax on net audited profits, OR

    • A fixed tax of RM20,000 per year (if applicable).

  • Companies must meet substance requirements (e.g., office, staff, and business activities in Labuan) to enjoy Labuan's tax benefits.

• Expenditure:

  • Annual license fee: RM60,000/USD20,000.

  • Each leasing transaction: RM20,000/USD6,000.

  • Application processing fee: RM1,000/USD350 (normal), RM3,500/USD1,200 (fast-track).