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The “Federal Territory of Labuan” consists of Labuan Island and six other small islands which are located on the east coast of Malaysia. Labuan gained its status as a mid-shore jurisdiction due to the Labuan Companies Act in 1990 that allows both non-residents and residents of Malaysia to establish Labuan companies. To elaborate more on this, this means Labuan still retains the laws and regulations of Malaysia but it also gained the competitive advantage of having low taxes for entities established here.
The industries of Labuan in the past included oil and gas, tourism and fishing but with the presence of Labuan International Business and Financial Center introduced in 1990; the industries of Labuan took a drastic change in which it relied less on its industries and focused more the cross-border trading, financial services, investments and wealth management, in addition of development of halal products for the Islamic market.
By having an ideal balance between client confidentiality and compliance with the international best standards and practices, Labuan also supports all of the business owners and investors by designed a business-friendly system anchored around an attractive but simple tax system. These systems are supported by a robust, modern and international-recognized legal framework which is enforced by the Labuan Financial Services Authority (Labuan FSA). All of these built the very foundation of helping Labuan becoming an appealing jurisdiction for many large international and local corporations to establish their companies.
Although, Labuan International Business and Financial Centre is a leading financial hub that attracts many investors; its geographical location also contribute to the reason why many investors flock to the area as Labuan is in close proximity and share common time zones with other Asian financial capitals including Shanghai, Hong Kong, Kuala Lumpur, and Singapore.
Labuan offers a complete range of business solution structures that revolve around the cross-border transactions, business dealing and wealth management needs. With Labuan International Business and Financial Centre building act as the financial hub, the economy of Labuan mainly focuses on cross-border trades, financing, investments and wealth management and the niche market of the Islamic consumer market, the halal product development. (Read more: Doing business in Labuan)
Due to Labuan is under the control of the Malaysian government, Labuan entities are accessible to nearly over 70 DTAs of Malaysia has signed with other jurisdictions while being exempt from taxes under the Labuan International Business & Financial Center (IBFC). Many international and local corporations flock to Labuan to set up their businesses either for investment and business trading purposes due to its low corporate tax rate of 3% for trading companies while non-trading companies have 0% corporate tax.
Last but not least, for business corporates who want to enter the Asian and/or Islamic markets, Labuan is ultimately the best choice to set up companies as it is one of the top Asian and Islamic finance centers connect both cultures to foreign domiciles.
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