Labuan IBC — Malaysia's 3% international company, set up from KL
Labuan is Malaysia's international business and financial centre. A Labuan trading company pays 3% corporate tax while substance requirements are met; a pure equity holding company pays 0%. 100% foreign ownership, multi-currency banking (USD/SGD/JPY), and dividends free of withholding tax.
The two types of Labuan company
| Trading company — 3% | Holding / asset company — 0% | |
|---|---|---|
| Typical activity | Services set by activity in the First Schedule of P.U.(A) 423/2021 (e.g. administrative, accounting, legal, back-office); whether your activity qualifies is checked case by case. Royalties and other IP income do not qualify | Receiving dividends and capital gains only |
| Corporate tax | 3% of net audited profits | 0% |
| Staff in Labuan | 2+ full-time employees, directly employed, working in Labuan | Not required |
| Minimum annual OPEX | RM 50,000+ (industry-specific, up to RM 200K; salaries and office rent paid in Labuan count toward it) | RM 20,000 |
| Physical office | Required (virtual office not accepted) | Registered office may suffice |
| If requirements are missed | Standard 24% applies | |
Temporary staffing or subcontractors do not count toward the employee requirement — direct employment contracts are mandatory (EPF/SOCSO enrolment). Sources: Labuan FSA, LHDN substance guidelines (2025).
Prices (as of 9 October 2026)
Example — Labuan company at 3% with two work-pass holders on Plan C/D (a couple or two co-founders working full-time in Labuan, one residence address): first year from JPY 4,470,000; year 2 onwards from JPY 3,220,000 a year; plus, every two years from year 3, the visa renewal pack for both and two years of the company's Labuan FSA annual fee paid in advance (JPY 1,260,000). Our fees only, excluding Japanese consumption tax: incorporation, both work visas, the accounts & audit pack (billed at the first year-end), Plan C/D and payroll for 12 months, and the payroll setup in year 1; from year 2, annual maintenance (JPY 680,000, as the annual fee is prepaid with the work visas), the accounts & audit pack, Plan C/D, the residence address plan at the plan rate and payroll. Salaries of the two full-time staff and government fees are not included.
All Bangga fees are fixed in Japanese yen and shown excluding Japanese consumption tax. Government charges and other out-of-pocket costs are quoted in advance and billed at cost. The audit fee is included in the audit & financial statements pack (priced for about 30 transactions a year). US$ and RM amounts are approximate, converted at US$1 = RM 4.0795 and RM 1 ≈ JPY 38.5 (BNM middle rate, 2026-09-30).
What people use Labuan companies for
- International holding — dividends and capital gains received are not taxed under the Labuan regime. The Japan–Malaysia tax treaty does not apply to Labuan offshore business activity (Protocol, paragraph 5(b)).
- Online business / SaaS — multi-currency, cross-border client base. Whether SaaS qualifies for 3% depends on what the business does, so whether your activity qualifies is checked case by case.
- Investment and trading vehicles — capital gains not taxed (licensed activities require a Labuan FSA licence).
- Consulting — advisory income from overseas clients (whether your activity qualifies is checked case by case). Treaty rates do not reduce Japanese withholding on payments to a Labuan entity taxed under the Labuan regime (Japan–Malaysia treaty, Protocol 5(b)), and royalties and other IP income fall outside the 3% regime (taxed at 24% under the Income Tax Act 1967; LBATA section 4).
To weigh Labuan against a Sdn Bhd or a two-company hybrid structure, see the company formation overview.
FAQ
Do I have to live in Labuan?
Living in Labuan is not part of the 3% requirements. However, the full-time employees counted for the 3% rate must physically work in Labuan (P.U.(A) 325/2025), and a work-permit holder's address must be in Labuan in some cases, such as when the company has only a management office in Labuan (Labuan FSA work permit FAQ). We confirm the current practice case by case before applying. To keep the 3% rate, a company in the services category needs 2+ full-time staff physically working in Labuan and RM 50,000+ annual OPEX (their salaries and the office rent count toward the OPEX — it is not an extra amount on top). Our local presence plans and residence address plan help you put this in place.
How long until the company is running?
Setup 2–8 weeks, bank account 1–3 months — run in parallel. Timelines start once the required documents are complete and payment has been received. They do not include the time you spend preparing documents.
Can I get a work visa through a Labuan company?
Yes — the Labuan Work Pass (renewable; the period is set at approval and is not fixed in the Labuan FSA guidelines — our fees assume renewal every two years), with Dependant Passes for family. A physical office in Labuan is required for the visa regardless of the tax election.
What about Japanese taxes?
If you remain a Japan tax resident, CFC rules may attribute the company's profits to you (see the notice above). Before you commit, please confirm this with a licensed tax accountant; we can arrange a session with one of our partner international-tax accountants.
Start with a free 30-minute consultation
Tell us about your plans for your Labuan IBC. Consultations in English, Japanese, Chinese or Malay, from our Kuala Lumpur office.