General Statutory Responsibilities of a Labuan Entity

This document provides a structured overview of the general statutory responsibilities applicable to all Labuan entities, including annual returns, financial reporting, AML/CFT compliance, tax identification, employment obligations and a comparison of taxation responsibilities.

Part A: What is a Labuan Entity?

A Labuan entity includes any of the following:

• A Labuan company incorporated under the Companies Act 1990.
• A Labuan foundation established under the Labuan Foundations Act 2010.
• A Labuan Islamic foundation under the Labuan Islamic Financial Services and Securities Act 2010.
• A Labuan limited partnership or limited liability partnership under the respective Act of 2010.
• A Labuan trust as defined in the Labuan Trusts Act 1996.
• A Malaysian bank licensee or Islamic bank licensee as defined in the respective Acts.
• Any Labuan financial institution as defined in the Labuan Financial Services Authority Act 1996.
• Any person declared by the Minister to be a Labuan entity under subsection 2B(2).

Part B: General Responsibilities

• Annual return and annual solvency declaration: required.
• Audited financial statement: required for Business Activity Code 1 to 20 and 23. Code 21 and 22 do not require it (a management account is required instead). Dormant entities do not require it (a management account is required instead).
• Board of directors' meeting in Labuan: required for Business Activity Code 22.
• Annual fee: required for all Labuan entities.
• Annual licence fee: required for all regulated business activities under LFSSA.
• Internal audit report: required for all regulated business activities under LFSSA.
• Other reporting: as specified in LFSSA, its regulations and guidelines.
• Comply with AML/CFT requirements: required.

Part C: Other Obligations

• Register TIN: yes.
• Submit CP204: no.
• Register E Number: yes.
• Submit Form E (annually): yes.
• Prepare Form EA, CP22 or CP22A: yes, if the entity has staff.
• Register with EPF, SOCSO and EIS: yes for Malaysian staff, no for foreign staff.
• Submit monthly return to EPF, SOCSO and EIS: yes for Malaysian staff, no for foreign staff.
• Register with HRD: yes, if the entity meets the threshold set by HRD.
• Submit monthly return to HRD: yes, if the entity meets the threshold set by HRD.
• Impose WHT for non-resident: yes if lodging tax under ITA, no if lodging tax under LBATA.
• Impose 2% WHT for agents, dealers or distributors: yes if lodging tax under ITA; to be confirmed by the IRB if lodging tax under LBATA.
• Prepare CP58 and submit CP107D: yes if lodging tax under ITA; to be confirmed by the IRB if lodging tax under LBATA.

Part D: Comparison of Taxation Responsibilities

The comparison below sets out each responsibility for a domestic entity (ITA), a Labuan entity taxed under the ITA, and a Labuan entity taxed under the LBATA:

• Type of TIN: domestic entity (ITA): C Number. Labuan entity (ITA): C Number. Labuan entity (LBATA): LE Number.
• Tax return: domestic entity (ITA): Form C. Labuan entity (ITA): Form C. Labuan entity (LBATA): Form LE1, LE4 (Code 1 to 20, 23), LE5 (Code 21, 22).
• Comply with ESR: domestic entity (ITA): no. Labuan entity (ITA): no. Labuan entity (LBATA): yes.
• Tax rate: domestic entity (ITA): 17% to 24%. Labuan entity (ITA): 17% to 24%. Labuan entity (LBATA): 3% (trading) or 0% (non-trading), where the entity complies with ESR.
• Income from IP rights: taxed under the ITA 1967 in all three cases.
• CP204: domestic entity (ITA): yes. Labuan entity (ITA): yes. Labuan entity (LBATA): no.
• Form E: yes in all three cases.
• Form EA, CP22 or CP22A: yes in all three cases.
• CP58 and CP107D: domestic entity (ITA): yes. Labuan entity (ITA): yes. Labuan entity (LBATA): presumably yes.
• SST: domestic entity (ITA): yes. Labuan entity (ITA): yes. Labuan entity (LBATA): no.
• Stamp duty: domestic entity (ITA): yes. Labuan entity (ITA): yes. Labuan entity (LBATA): no.
• Withholding tax to non-resident: domestic entity (ITA): yes. Labuan entity (ITA): yes. Labuan entity (LBATA): no.

For further details, please refer to our whitepaper on Tax Framework in Labuan IBFC: Recent Developments.

Part E: Abbreviations

• EA: Employees Return.
• EIS: Employees Insurance System.
• EPF: Employees Provident Fund.
• ESR: Economic Substance Requirements.
• HRD: Human Resource Department.
• IP: Intellectual Properties.
• IRB: Inland Revenue Board of Malaysia.
• ITA: Income Tax Act 1967.
• LBATA: Labuan Business Activity Tax Act 1990.
• LFSSA: Labuan Financial Services and Securities Act 2010.
• SOCSO: Social Security Organisation.
• SST: Sales and Service Tax.
• TIN: Tax Identification Number.
• WHT: Withholding Tax.

The information contained in this document is provided for information purposes only. It does not constitute legal advice and should not be relied upon as such. Readers may need to obtain professional advice on legal or tax issues before relying on it. QX Trust tries to ensure that the content is accurate, adequate and complete, but does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. QX Trust expressly disclaims any liability to any person for loss or damage incurred as a result of reliance placed upon the information contained in this document.

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