LABUAN LEASING LICENSE

Are you looking to start a leasing business in Asia? Labuan could be the right platform for you! A Labuan Leasing Company is permissible to deal with both international and local Malaysian entities whilst you can enjoy 100% ownership and a low tax rate of 3% on net audited profits!

Foreigners and Malaysians are welcomed to start their leasing business in Labuan which offers many favorable tax incentives and regulatory framework where innovative leasing structures have been put in place by the Labuan FSA to help businesses reduce their operational costs significantly!


“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/lessee, regardless whether the lease/let is with or without an option to purchase the property.

Definition of ‘property’ includes the following:
1. Plant and machinery
2. All types of equipment
3. Chattel – attached or to be attached to the earth
4. Ships – bare boat charters only, excluding transportation of passengers or cargo by sea or the charter of ships on a voyage or time charter basis

TYPICAL LABUAN LEASING STRUCTURES

LABUAN LEASING STRUCTURE - Foreign Co (asset owner)

Benefits

  • Labuan Leasing Company is taxed at 3% of net audited profits
  • No Withholding Tax on lease rental received from Malaysian customers
  • No Withholding Tax on lease rental payable by Labuan Leasing Company to Foreign Company
  • Access to more than 70 Malaysia Tax Treaty partners to reduce Withholding Tax on lease rental received by Labuan Leasing Company from Foreign Customers
  • Liberal exchange control environment in Labuan
LABUAN LEASING STRUCTURE - Foreign Financier

Benefits

  • Labuan Leasing Company is taxed at 3% of net audited profits
  • No Withholding Tax on lease rental received from Malaysian Customers
  • No Withholding Tax on interest payment payable by Labuan Leasing Company to Foreign Financier
  • Access to more than 70 Malaysia Tax Treaty partners to reduce Withholding Tax on lease rental received by Labuan Leasing Company from Foreign Customers
  • Liberal exchange control environment in Labuan

Tax Advantages of A Labuan Leasing Company


  • 3% corporate tax on net audited profits
  • No withholding tax on dividends, interest, technical fee and royalty / lease rental
  • No stamp duty on all instruments including share transfers
  • No import duty / sales tax
  • No foreign exchange controls
  • No capital gain tax and inheritance tax
  • Enjoy Malaysia’s Double Tax Agreements with over 70 countries
  • 50% personal tax exemption for expatriate professionals employed by the leasing company
  • 100% tax exemption for director’s fees received by non-citizen directors

Labuan Leasing License application for Labuan FSA's approval should include the following documents and information:


  1. A Business Plan detailing the operations of the applicant and the nature of the leasing transactions, specifying if business will be conducted with residents or non-residents
  2. Group corporate shareholding structure
  3. Diagram of the leasing transaction
  4. Organisation chart with board of directors and senior management
  5. Payment of License application fee of MYR 1,000

Note: Prior written approval from Labuan FSA must be obtained for any appointment of a director, person in control or Chief Executive Officer, of which they must be a fit and proper person.

Operational Requirements for Labuan Leasing Company


  1. Must maintain bank account(s) preferable in Malaysia to facilitate the leasing operation including lease remittances/lease rental;
  2. The lease agreement is duly stamped and endorsed by the Local Authorities, i.e. Collector of Stamp Duties at the Stamp Duty Office, Inland Revenue Board of Malaysia;
  3. Business transactions in foreign currency including Malaysian Ringgit for the purpose of defraying administrative and statutory expenses;
  4. To notify Labuan FSA of any changes to its constituent documents and business plan within 30 days of the changes being effected;
  5. To obtain an approval from Labuan FSA on new appointment or change of its directorship and shareholding;
  6. To notify Labuan FSA on the termination/extension of any leasing transaction within 30 days upon the termination/extension;
  7. To obtain prior approval from Labuan FSA for any change of lease asset for leasing transactions with Malaysian residents;
  8. To ensure all leasing transactions and agreements are done through Labuan with adequate and proper records including books of accounts must be maintained in Labuan;
  9. To conduct its business with due diligence and sound principles and comply with the laws and regulations where it services its clients;
  10. To ensure all its leased assets are adequately insured;
  11. To ensure that the directors and officers responsible for the management of the company are fit and proper persons at all time;
  12. To ensure that all leasing transactions with its related party comply with the transfer pricing rules issued by the related party’s relevant authorities;
  13. Subsequent leasing transactions with Malaysian residents are subject to Labuan FSA’s prior approval and payment of subsequent transaction fee;
  14. Subsequent leasing transactions with non-residents only require notification to Labuan FSA within 30 days after the execution of the lease agreements;
  15. All final lease agreement between the lessor and the lessee must be certified, duly stamped and endorsed by the Malaysia Stamp Duty Office to be submitted to the Labuan FSA;
  16. To obtain prior approval from Labuan FSA for any change of leased asset for leasing transaction with Malaysian residents;
  17. Any change in the lessee will be considered as subsequent leasing transaction and requires prior approval from Labuan FSA for transactions with Malaysian residents and notification for the transaction with non-residents;
  18. To appoint an approved external auditor to undertake an audit in respect of its accounts and business operations and submit the audited account to the Supervision and Enforcement Department of Labuan FSA within six (6) months after the close of each financial year;
  19. To provide statistics and information as may be required by Labuan FSA in relation to prudential information, general business conduct and volume and direction of business in Labuan

Application Timeframe


  1. Approximately 30 to 60 days subject to further information and supporting documents required by Labuan FSA during the approval process
  2. Interviews / Meetings with the key personnel may be requested by the Labuan FSA to understand or clarify certain processes

Annual Fee


Annual License Fee  MYR 60,000
Each Subsequent Leasing Transaction  MYR 20,000
Marketing Office Fee
(optional)
 MYR 7,500

The Annual License, Subsequent Leasing Transaction and Marketing Office fees are payable upon approval valid up to 31st December. For subsequent years, fees are to be paid on or before 15th January of each calendar year

STEPS to Apply for A Labuan Leasing License


HOW CAN I GET STARTED - Labuan Leasing

QX TRUST, your one-stop Trust Company in Labuan!


QX TRUST license application service level for Labuan Leasing license include:
  • Consultation on client's eligibility and application procedures
  • Feasibility study write-up based on client's profile
  • Due Diligence, Profiling and Guidance on documents preparation
  • Construct exclusive Business Plan to meet client's objectives
  • Preparation of Financial Forecast, KYC, Operation and AML/CFT Manuals, Client Agreements etc
  • Submission and supervision of application process until approval
  • Act as liaison and key contact person for both client and Labuan FSA on all correspondences, meetings and /or interviews (if any)