LABUAN

(PAST YEAR QUESTION)

PREPARED BY: AC2205K
NORAINI BT JALARDIN (2013219062)
NURUL SYUHADA BT AZMAN (2013417166)

JAN 2012 (QUESTION 6)

i) Explain the meaning of Labuan business activity as provided under

Section 2, Labuan business Activity Tax Act 1990 (LBATA)

By Section 2(1) of LBATA 1990, Labuan business entity means:
a Labuan trading or a Labuan non- trading activity
carried on in, from or through Labuan
in a currency other than Malaysian currency
by a Labuan business entity
with a non- resident or with another Labuan entity
ii) State two examples each for Labuan trading activity and Labuan nontrading activity
Labuan trading activity: banking, insurance, trading and management
Labuan non- trading activity: investment in securities, shares, loans and deposits

iii) State with reason, how Alpha Holdings (L) Ltd would be taxed under
the Labuan Business Activity Tax Act 1990
Alpha Holdings (L) Ltd would be taxed at a preferential rate of 3% of its
chargeable profits as declared by the entity or at a fixed rate of RM20,000
upon election by entity. This is because Alpha Holdings (L) is carrying on
trading business (management service activity) and the non trading
business(investment holding activities) will be taxed at 0%
iv) State the tax treatment of dividends received by Alpha (M) Sdn Bhd
Tax treatment of dividends received by Alpha (M) Sdn Bhd will be exempted
from tax

v) Assume Alpha Holdings (L) Ltd has obtained an offshore loan from
Tris Trust Bank (L) Ltd which is lisenced to carry out banking business
in Labuan. Alpha Holdings (L) Ltd has obtained approval from the
Minister of Finance to lend out the funds to Alpha (M) Sdn Bhd.
State whether Alpha (M) Sdn Bhd is required to withhold tax from
interest payments made to Alpha Holdings (L) Ltd.
Alpha (M) Sdn Bhd is not required to withhold tax from interest payments
made to Alpha Holdings (L) Ltd because interest paid by Labuan entity to
another Labuan entity will be exempted

vi) State the tax treatment of the zakat payment made by company in
Labuan as well as the company in Semenanjung Malaysia.
Zakat paid by company in Labuan will be given tax rebate against the tax
charged ( whether at 3% of chargeable profit or upon election RM20,000) for
a year of assessment whereas for company in Semenanjung Malaysia will
be charged 2.5% of the Agregate Income

OCT 2009 (QUESTION 6)

a. The taxability of income derived from offshore trading activities as well
as non-trading activities of Labuan offshore companies.
The income derived from offshore trading activities will be taxable and non
trading activities will be non- taxable
b. The withholding tax implications on payments made to a non-resident
person.
Withholding tax will be exempted because the payment is from Labuan entity
to non- resident person.
c. Director fees received by Encik Sofar and his Malaysian resident
director.
The director fees received by Encik Sofar is exempted because Encik Sofar is
non resident and the Malaysian resident director will be charged to the tax.

d) The employment income received by his manager.

His manager will enjoy an exemption of 50% on their gross income since he
is non resident person.
e) The payment of zakat on business and donation made to Malaysian
government by the Labuan offshore company.
The payment of zakat on business for a year assessment will be granted a
tax rebate subject to a maximum of the tax charged that is 3% of the net
profit or RM20,000 upon election. However, there is no restriction for
donation made to Malaysian Government by Labuan offshore company.