Malaysia: The refined Labuan tax regime

In brief

The introduction of the economic substance requirements under the Labuan tax regime in 2019 came hand in hand with a myriad of ambiguities and uncertainties, which subsequent legislation and guidelines aimed to clarify.

This alert discusses Labuan tax developments such as the updated substance requirements for equity holding companies, the taxation of Labuan entities who carry out "other trading" activities, stamp duty implications for instruments relating to a Labuan entity, and also the latest amendments to legislation, via the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 ("2021 Regulations")1 and Income Tax (Exemption) (No. 11) Order 2021 ("Exemption Order").


Contents

In this issue: 

  • Updates related to the economic substance requirements for Labuan pure equity holding companies
  • Clearer taxation of Labuan entities carrying on "other trading" activities under the LBATA
  • Availability of stamp duty exemption subject to fulfilment of the substance requirements
  • Updates related to deductions for payment made to Labuan company by residents
  • Key takeaways 

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1 The Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations was gazetted on 22 November 2021.

 

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