Many still remain unaware of the benefits and opportunity to do leasing business through Labuan IBFC. The leasing business in Labuan IBFC offers competitive tax regime and benefits, and at the same time provides the opportunity to company to conduct their business operations cost effectively.
Definition of leasing
Labuan leasing means the business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer, regardless whether the letting is with or without an option to purchase the property. Property includes any plant, machinery, equipment or other chattel attached or to be attached to the earth.
With the exception to the transportation of passengers or cargo by sea or the letting out on charter of ships on a voyage or time charter basis. Labuan leasing companies are allowed to carry on leasing of ships on a "bare boat basis”.
Entry requirements
Application Requirement
The submission should include, but is not restricted to the following:
Annual Licence Fee Requirement
Operational Requirements
The Labuan leasing company must comply with the following operational requirements as required by Labuan FSA:
Key Benefits
By conducting the leasing business through Labuan IBFC, the entity can enjoy the significant tax benefit. The Labuan leasing company is deemed as a Labuan trading company under Section 2 of Labuan Business Activity Tax Act ("LBATA”) 2010, and therefore has the option either to pay a flat tax rate of RM 20,000 or 3% of audited net profit. Besides that, there is no withholding tax for any dividends paid by a Labuan leasing company out of its profits. These tax benefits are applicable to Labuan leasing company which conducts the leasing business either with Malaysian resident or non-resident.
Definition of leasing
Labuan leasing means the business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer, regardless whether the letting is with or without an option to purchase the property. Property includes any plant, machinery, equipment or other chattel attached or to be attached to the earth.
With the exception to the transportation of passengers or cargo by sea or the letting out on charter of ships on a voyage or time charter basis. Labuan leasing companies are allowed to carry on leasing of ships on a "bare boat basis”.
Entry requirements
- A Labuan company incorporated or registered under the Labuan Companies Act 1990.
- A Special Purpose Vehicle (SPV) set up to facilitate leasing transactions, including inter-company transactions.
Application Requirement
The submission should include, but is not restricted to the following:
- The nature of business of the applicant
- Composition of its Board of Directors and senior management. Prior written approval to Labuan Financial Services Authority (Labuan FSA) must be obtained for any appointment of director, person in control of CEO who must be a fit and proper person.
- A business plan detailing the operations of the applicant with regard to its Labuan entity and the nature of the leasing transaction, including whether they would be conducted with residents or non residents
- Audited financial statement for the last two years (if applicable). Copy of the necessary approval from Bank Negara Malaysia for dealings with Malaysian residents.
- Any other information that may be relevant to the application.
Annual Licence Fee Requirement
| Lease to Malaysian Resident | Lease to non-Malaysian resident | |
| Annual Fee | RM60,000/- | Nil |
| Each Subsequent leasing transaction | RM20,000/- one off | Nil |
Operational Requirements
The Labuan leasing company must comply with the following operational requirements as required by Labuan FSA:
- All leasing business and transactions must be done through Labuan IBFC;
- The company’s record books and accounts are maintained properly in Labuan;
- Must ensure that there is sufficient capital being maintained to support the company’s business operations;
- All business transactions must be done in foreign currency, except for the payment of statutory and administrative expenses such as office rental, salary, stationeries and other relevant expenses;
- Must submit a copy of its audited financial statement to Labuan FSA, within three (3) months after the close of each financial year;
- Need to submit statistic report and any other information of the business operations, if required by Labuan FSA; and
- Any changes to the company’s constituent documents, shareholdings, management or business plans must be notified to Labuan FSA through the appointed Labuan Trust Company.
Key Benefits
By conducting the leasing business through Labuan IBFC, the entity can enjoy the significant tax benefit. The Labuan leasing company is deemed as a Labuan trading company under Section 2 of Labuan Business Activity Tax Act ("LBATA”) 2010, and therefore has the option either to pay a flat tax rate of RM 20,000 or 3% of audited net profit. Besides that, there is no withholding tax for any dividends paid by a Labuan leasing company out of its profits. These tax benefits are applicable to Labuan leasing company which conducts the leasing business either with Malaysian resident or non-resident.