Open a Financial Company in Labuan

The Labuan International Business and Financial Centre is recognized for its pro-business environment, the simple tax system and the legal framework that is supported by the regulator. There are a wide range of business and investment structures that make it accessible for investors to engage in various business transactions or plan their wealth management. Most of the companies involved in the financial industry need to obtain a Labuan financial license (our team offers this service) in order to be able to operate here.

Investors can open a financial company in Labuan with the help of our team with great ease; they can benefit from the low taxation regime as well as the location, in the Asia Pacific region, close to growing Asian economies. 

The Labuan company formation process can be assisted upon request by our experienced team. Our Labuan company specialists can offer more details on the general requirements for company incorporation in this jurisdiction. 

What are some examples of financial services offered in Labuan?

There are several types of financial services available in Labuan, more specifically in the International Business and Financial Centre, the Labuan IBFC. We list some of them below:

• banking – a number of banks and financial intermediaries offer their services, including Islamic banking services;
• insurance – the insurance industry is an important one in Labuan, with direct insurers and reinsurance companies; 
• leasing – companies offer leasing solutions and structure as a response to the growing demand for businesses from various countries;
• broker services – money broking services for those entering transactions, with the broker acting as the intermediary;
• company management – included here are treasury processing activities as well as Islamic advisory services and processing;
• others – wealth management services, fund establishment services as well as fund management services.

For more details about regulations or specific details about these types of services, please reach out to our Labuan company formation agents.

Applying for a financial license for banking institutions

Investors who will open a financial company in Labuan operating as a banking institution need to hold proper licenses. The licensing formality must be completed during the process of company incorporation in Labuan, therefore, at the moment when the company begins its operations, it needs to have a valid license.

The licensing formalities start by submitting the Application for License to Carry on Labuan Banking Business. The document is submitted to the Labuan Financial Services Authority (LFSA) and some of the highlights of the application are:

• the information submitted by applicants benefits from privacy rights, as per the rules of the Section 178 of the Labuan Financial Services and Securities Act 2010 and the Section 139 of the Labuan Islamic Financial Services and Securities Act 2010;
• the application can be processed in a period of 15 to 30 working days;
• the standard processing is 30 days, for which applicants need to pay a licence application fee of $500;
• the 15 days processing is available as a fast-track option, for which applicants must pay an additional fast-track fee of $1,500;
• the information applicants must present fall under the provisions of the Sections 88 and 89 of the Labuan Financial Services and Securities Act 2010 and Sections 63 and 64 of the Labuan Islamic Financial Services and Securities Act 2010.

Businessmen have to provide details on the company type, the activity carried by the bank (such as commercial bank, investment bank, etc.), capital, shareholding, directors, etc. Please mind that the form also contains a mandatory section on the company’s expected financial projections for the first 3 years of financial activity.

If you want to set up a company in Labuan as a banking institution we highly recommend you to address our consultants for personalized legal assistance, given that the registration and licensing procedures are more complex than in the case of other commercial companies.

Licenses for other financial activities

Similar procedures are available for investors who plan to open a financial company in Labuan in the insurance industry (similar form, fees and requirements – they also benefit from the fast-track application option). These steps must also be taken by those involved in activities such as:

1. money broking;
2. exchange businesses;
3. trust companies;
4. capital market companies;
5. other financial businesses (as per the Section 90/Section 65 of the laws mentioned above);
6. payment system operators, etc.

What is the Labuan tax regime like?

Investors who open a company in Labuan enjoy the favorable taxation regime. Operations are divided between trading and non-trading activities. Trading activities are those such as banking, insurance, management and others while non-trading activities relate to investment holdings and holding shares, loans and other properties by a Labuan legal entity. A 3% rate applies on audited net profits.

Investors who open a Labuan offshore company are subject to few filing obligations. Moreover, companies in Labuan are subject to the double tax treaties concluded by Malaysia. 

What are some other conditions for doing business in Labuan?

Labuan is an attractive location for investors because there are no restrictions on foreign ownership and the is no minimum share capital requirement. A minimum of one shareholder is required and he/she can be an individual or, alternatively, another corporation. 

Companies in Labuan are incorporated as per the Labuan Companies Act 1990and the legal framework for the Labuan IBFC is established by the Labuan Financial Services Authority. As far as the local corporate structures are concerned, investors can open a company in Labuan that takes one of the following forms:

• Labuan companies – limited by shares or guarantee or an unlimited company (they need to be licensed for certain financial activities);
• protected cell companies – can be used as a tax planning tool or a wealth management vehicles (they are comprised of several cells, independent of each other and holding different assets and liabilities);
• partnerships – the limited partnership and the limited liability partnership (combining the features of a limited liability company with that of a partnership).

In addition to these business forms, investors in Labuan can also open private trust companies, foundations, special purpose trusts, and others. 

Contact our company formation specialists for more detailed information on how to open a financial company in Labuan, as well as other details on investments in this region. You can also rely on us if you want to open a Labuan offshore.