Hybrid structure — Sdn Bhd credibility × Labuan 3%
A two-company structure: an onshore Sdn Bhd (local credibility, domestic sales, bank loans, Employment Pass) plus a Labuan IBC (3% on international profits; intercompany dividends paid out of Labuan business income are tax-free until YA2027 under P.U.(A) 59/2025). As a rough guide, worth considering once international profit (after salaries to you and your family member or partner) exceeds about JPY 15M a year — this depends on your conditions.
How the tax flows through the structure
| # | Step | Tax |
|---|---|---|
| 1 | Book international profits in the Labuan IBC | 3% |
| 2 | Distribute the remainder to the Sdn Bhd as an intercompany dividend | 0% (until YA2027, conditions apply*) |
| 3 | Accumulate capital in the Sdn Bhd (credit standing, loans, domestic contracts) | — |
| 4 | Distribute to the individual from the Sdn Bhd | 0% up to RM 100K, 2% above |
Overall burden on this flow: roughly 3–5% (3% Labuan tax plus 2% on individual dividends above RM 100K). A Japanese company pays corporate taxes at an effective rate of about 21–34% as a small company in Tokyo (rising with income; 29.74% for large companies), and dividends are then taxed again in the shareholder's hands. Labuan substance costs and Japan's CFC rules are not included. Figures are indicative; individual results depend on facts and current law.
* The intercompany dividend exemption comes from the Income Tax (Exemption) Order 2025 [P.U.(A) 59/2025]: it covers dividends paid out of Labuan business income and runs from YA2023 to YA2027. No extension has been announced, so model the years after YA2027 separately.
Single company vs hybrid
Each structure on its own — Sdn Bhd, Labuan and how to choose — is explained in the company formation overview.
| Sdn Bhd only | Labuan only | Hybrid | |
|---|---|---|---|
| Corporate tax | 24%* | 3% / 0% | 24% + 3% (split) |
| Domestic Malaysian sales | Yes | Generally no | Yes, via the Sdn Bhd |
| Bank loans | Easier | Limited | Via the Sdn Bhd |
| Visas | Employment Pass | Labuan Work Pass | Both available |
| Audit | Exemptions exist | Required | Both required |
| Rough size guide (profit)** | Mainly domestic, or profit below ~JPY 15M | Mainly international, profit ~JPY 15M+ | Domestic + international, international profit ~JPY 15M+ |
* Sdn Bhd: 24% for companies more than 20% foreign-owned; the 15–17% SME rates apply only if foreign ownership is 20% or less (LHDN; Finance Act 2023).
** Annual profit after paying salaries to you and your family member or partner. A rough guide under our default assumptions (trading activity; two full-time staff in Labuan — you and one family member or business partner on Labuan work passes; Bangga's local presence Plan C/D; RM 1 ≈ JPY 38.5 (BNM middle rate, 2026-09-30)); it changes with your conditions — try the simulator on the Japanese page. To use the 3% rate, two full-time staff (you may count yourselves) must work in Labuan; foreign nationals working there on Labuan work passes must be paid a salary that meets the work-pass requirement (RM 10,000+ a month). Assumes the profits are not attributed to Japanese shareholders under Japan's CFC rules.
Substance on the Labuan side (Hasil 2025–2026 rules)
- 2+ full-time, fit-and-proper employees (3–4 in some industries; direct employment with EPF/SOCSO) — if you and your family member or partner are the two full-time staff, there is no extra payroll cost (your salaries are household income, so only their income tax and EPF count); hiring 2 local staff at RM 5,000 a month adds about JPY 5.31M a year in salaries and employer contributions (EPF, SOCSO, EIS; RM 1 ≈ JPY 38.5 (BNM middle rate, 2026-09-30)).
- Physical office (virtual offices not accepted) — Bangga's local presence Plan C/D costs JPY 140,000 a month (about JPY 1.68M a year).
- Industry-specific minimum annual OPEX — administration RM 50K / funds RM 100K / banking & insurance RM 200K per year. The salaries and office rent paid in Labuan count toward the OPEX (it is not an extra amount on top).
What Bangga covers
- Simultaneous setup of the Sdn Bhd + Labuan IBC — incorporation 2–6 weeks / 2–8 weeks, bank accounts 1–3 months, work visa 3–6 months, run in parallel
- Bank accounts (Maybank / CIMB / HSBC)
- Annual accounting and audits for both entities
- Transfer-pricing documentation (tax-accountant supervised)
- Employment Pass for directors and key staff
Start with a free 30-minute consultation
Tell us about your plans for a hybrid structure. English and Japanese support, from our Kuala Lumpur office.