Setting Up a Labuan Investment Holding Company (IHC) 

Labuan Investment Holding Companies (ICHs) enjoy zero tax on non-trading activities, no withholding tax on dividends, and freedom from foreign exchange controls. Combined with a simplified compliance requirements, a Labuan ICH setup is much faster than in any other regions in Malaysia.

This article walks you through all the essentials you need to know for establishing and operating your own Labuan Investment Holding Company (IHC). 

What is a Labuan Investment Holding Company? 

Labuan Investment Holding Companies (IHCs) are specialized entities established under the Labuan Companies Act (1990), designed to hold and manage investments. 

Regulated by the Labuan Financial Services Authority (Labuan FSA), they enjoy unique advantages such as substantial tax benefits, operational flexibilities, and broader access to international markets.

While investment holding companies operate all around Malaysia, there are significant differences in comparison to Labuan IHCs. Here’s a list of key considerations that are unique to Labuan investment holding companies: 

1. Tax Advantages:  

• 0% tax on non-trading activities such as pure equity holding.
• Trading activities can choose between a 3% tax on net profits or a flat rate of RM 20,000.
• No withholding tax on dividends, interest, royalties, or service fees paid to non-residents.
• No GST or SST

2. No Foreign Exchange Controls:

• Companies can maintain bank accounts in various currencies, making international transactions easier.
• Labuan allows free movement of capital without foreign exchange controls.

3. Access to Wealth Management Tools: 

• Labuan offers modern and robust trust legislation and private foundations for wealth management and succession planning. 
• Companies can choose the most suitable combinations of IHC, trust, and/or foundation based on their specific needs.

Key Requirements for Setting Up a Labuan IHC

Both foreign and locally-owned companies cannot self-register their Labuan IHC and must engage with registered filing agents such as Emerhub to carry out the process on their behalf. 

We will ensure all requirements are met as per Labuan FSA regulations such as: 

• Share Capital: Minimum of one share, with no set minimum value, in any currency except in Malaysian Ringgit.
• Paid-Up Capital: Minimum of USD$1 or equivalent for standard Labuan IHCs. Higher capital requirements may apply for specific financial activities like banking and insurance.
• Directors: At least one director who must be a Labuan resident.
• Shareholders: Minimum of one shareholder (foreign shareholders permitted).
• Company Secretary: Must appoint at least one secretary who is an approved officer of a Labuan trust company.
• Registered Office: Required to have a registered office in Labuan. 

Economic Substance Requirements

To qualify for tax benefits, Labuan holding companies must meet specific economic substance requirements. According to the Labuan Finance Services Authority (Labuan FSA), the requirements are as follows:

Type of Non-Trading Activity	Full-Time Employees in Labuan	Annual Operating Expense in Labuan
Pure Equity Holding Activities	0	RM20, 000
Other Non-Trading Activities	1	RM 20, 000
Trading Activities	2	RM100, 000

The Application Process for Setting Up a Labuan Holding Company

Setting up a Labuan Investment Holding Company is quicker than registering a company in mainland Malaysia due to its offshore status and unique regulatory framework. With Emerhub’s assistance, we ensure each step is efficiently managed in compliance with Labuan FSA regulations:

1. Choose and Reserve a Company Name

The first step in setting up a holding company in Labuan is to reserve and register your business name with Labuan FSA. 

Your company name must not contain abbreviations and include a certified English translation. 

Emerhub’s experts will conduct a comprehensive name search and reserve your desired company name with the authorities. The company name is typically approved within 24 hours.

2. Prepare Required Documents for the Labuan Financial Services Authority (FSA)

After the name reservation, you need to compile the necessary documents and prepare the application for submission.

Following are the documents required to register a holding company in Labuan:

• Memorandum of Association.
• Statutory Declarations from Directors.
• Certified copy of passport or identity card of directors and shareholders.
• Proof of registered office address.

Emerhub will ensure proper certification and translations of the above documents and handle the submission on your behalf.

Once submitted, the application goes through a thorough KYC process. If all documents are in order, the FSA issues a Certificate of Incorporation in Labuan.

3. Open a Corporate Bank Account

Upon incorporation, you must open a business bank account to manage the company’s finances. Most banks will require the following documents: 

• Certificate of Incorporation
• Company constitution 
• Board resolution
• Director’s identification documents

4. Tax Registration 

All IHCs are required to choose the preferred taxation option with the Inland Revenue Board of Malaysia (IRBM) as part of the process. They must make an election in writing to the Director General of Inland Revenue Board of Malaysia (DGIR) choosing either a 3% on net audited profit or a flat rate of RM 20,000.

Note that if no election is made within 3 months from the beginning of the basis period for a year of assessment, they will be automatically taxed at 3% on net audited profit.

Register Your Labuan Investment Holding Company (IHC) with Emerhub

Ready to establish your Labuan Investment Holding Company? Emerhub experts offer comprehensive assistance from start to finish of your company registration in Labuan. 

Our team provides thorough support for your Labuan investment holding setup and ensures ongoing regulatory compliance with Labuan regulations for smooth business operations. 

Fill out the form below and we will put you in touch with one of our experts.