Labuan Tax Haven


What is a Tax Haven?

Tax haven (or tax shelter) is often referred to a geographical location or area outside the jurisdiction of one’s own home country, that imposes minimal restrictions on legitimate business activities within its jurisdiction, most importantly resulting in minimal or no tax liability to foreign individuals or businesses. The place is often a politically and economically static environment.

Such offshore havens come with international banking facilities and financial services and importantly, promises secrecy by providing privacy and confidentiality of the deposits and earnings.

Tax havens are often for non-nationals of that country because it is a way to attract foreign capital and funds into the country by offering such incentives.  Most tax havens do not require individuals to reside in their country or businesses to operate out of their country to receive such tax benefits.


Characteristics of Tax Haven

According to the Organization for Economic Cooperation and Development (OECD), these are some characteristics of a tax haven.

  • Minimal, no or nominal tax liabilities on relevant income
  • Confidentiality
    • No effective exchange of information
    • No transparent or publicly available information
    • Shares limited or no financial information with foreign tax authorities
  • Light and flexible incorporation and licensing requirements
  • Low supervisory requirements


Benefits of a Tax Haven

  • To Tax Haven Countries
    • The countries benefit by being able to attract inflow of capital into their financial system
  • For Businesses and Individuals
    • They are able to benefit by lowering and minimizing their tax liabilities because tax haven countries have zero to low single digit taxation as compared to the high taxes in their home countries.



Labuan Tax Haven

The jurisdiction in Labuan shares similar characteristic as a tax haven as mentioned above. However, in Labuan, it is often referred to as an offshore financial centre (or OFC). The terms are sometimes used interchangeably because of its similar concept.

As reported by the Labuan Financial Services Authority (Labuan FSA), there are as many as 14,200 companies registered and operating in Labuan as at end of 2017.


No or low single-digit tax rate

Labuan offshore companies involved in trading are subjected to pay 3% on net audited earnings or RM20,000, whichever is lower. For companies that are non-trading in nature, they are not liable to pay tax. Investment vehicles in Labuan are not required to pay any tax.



Labuan jurisdiction does not impose any disclosure requirements. Labuan keeps no public register of the trusts and private foundations registered and established within its jurisdiction. It offers similar level of ownership secrecy but a fraction of the cost as compared to other offshore locations such as Hong Kong or Singapore.


Labuan not only offered low tax for companies but it is more than just that for business and financial services to achieve desired wealth management objectives. Find out more about Labuan offshore services.