FARHANA 2014280

stock. insurance. shipping operations or ther activity which are not Labuan non-trading activities. management. shares. INTRODUCTION The Labuan International Business and Financial Centre was established on 1 Oct 1990 as Labuan International Offshore Financial Centre. . trading. licensing. Labuan non-trading activities mean activities relating to the holding of investments in securities. Approved Labuan trading activities include banking.

INTRODUCTION Labuan activities are required to be carried out with persons not resident in Malaysia. and in foreign currencies. or for acquisition of shares or other securities in a Malaysian company by a . although there are some exceptions for banks. insurance companies and Labuan entities carrying on the business of Labuan leasing or money-broking. Transactions in Malaysian Ringgit are permitted only for purposes of defraying administrative and statutory expenses.

there is no charge to tax. trading. insurance.) • Under section 3B of ITA:  Income in respect of a Labuan Business activity . (ex: all investment activities)  3rd option (tax under ITA) . The taxability of income derived from offshore trading activities as well as non- trading activities of Labuan offshore companies.a.000  ex: banking. • Under the LBATA:  Labuan trading activity is chargeable to tax  at a rate of 3% on the net audited profits  or elect to be charged tax at a fixed rate of RM20. management or licensing  A Labuan non-trading activity.make an irrevocable election for their profits (at the usual rate of 25% under the ITA.

Under Section 4A of the Income Tax Act 1967  Technical services. .   Special classes of income I. b. advice or assistance specified in section 4A(i) and (ii) of the Income Tax Act   Other income . The withholding tax implication on payments made to a non-resident person Any payments made to a non-resident person is not subject to withholding tax for :  Royalties . Under Section 109 of the Income Tax Act 1967 II.Payments for other gains and losses under Section 4(f) of the Income Tax Act 1967 made by an offshore company to a non-resident have also been exempted from income tax and therefore not subject to withholding tax. Any interest paid by a Malaysian resident to offshore banks in Labuan is not subject to withholding tax.Under Section 109 of the Income Tax Act 1967  Interest I.

Taxable as normal Malaysian employees resident whereas non- director residents directors are fully exempted . Director fees received by Sofar and his Malaysian resident director Exemption for non-citizens in Sofar respect of 100% of (Chief Executive director’s fees from Officer) Labuan entities received from Y/A 2011 until Y/A 2020.c.

Sofar’s manager does not get 50% tax exemption on Labuan and housing allowances paid since his manager is Arabic citizen. co-located granted an exemption of 50% of their income from such employment up to Y/A 2010. provided the employment is exercised in Labuan. The employment income received by his manager Non-citizen individuals employed in a managerial capacity with a Labuan entity in Labuan.d. . made available as a credit to set-off against the tax liability for that Y/A or any subsequent Y/A.RM20. . The payment of zakat on business and donation made to Malaysian government by the Labuan offshore company Payment of Zakat  Any zakat which is paid by a Labuan entity in the basis period for a year assessment (Y/A) will be granted a tax rebate  Subject to a maximum of the tax charged: I.000 upon election .Any excess of tax rebate over the tax charged will: I. 3% of net profits or II. not be refunded to the Labuan entity or II.

Donation can be in the form of: I. Cash II. Deduction is given in the basis period of a year assessment(Y/A) Donation made to the Government is not subject to any restriction. Tax implication on donation made to Malaysian government by Labuan offshore company.e. Full amount of donation can be taken for deduction. Any donation made to the government is entitled for deduction-S44(6). Gift .

charter. powers and duties are . There are no indirect taxes (such as sales taxes. rules. under or by which a Labuan entity is established and the scope of that entity’s function. The following instruments are exempted from stamp duty: a) all instruments which are executed by a Labuan entity in connection with a Labuan business activity. business. statute. partnership agreement or other instrument. f. 2) Stamp duty . by-laws. service taxes and custom duties) since Labuan enjoys free port status. b) all Memorandum and Articles of Association. Other tax matters in Labuan 1) Indirect taxes .

if election is made. Capital gains arising from sale of shares in a Labuan company by the shareholders are not taxable assuming that the shareholders do not have a business presence in Malaysia and are not investment dealers . capital gains are reflected as part of the net profits and hence subject to 3% tax. However. Other tax matters in Labuan 3) Capital Gain . For a Labuan entity carrying on a Labuan trading activity.000. f. the liability is restricted to RM20.