Breadth of views - breadth of capabilities
We will give you a choice of best approaches

FOLLOW US ON:

Labuan Leasing Business

LEASING TO REDUCE COSTS AND MAXIMISE TAX ADVANTAGES

For many industries, including shipping, a leasing business provides a number of financial benefits. A leasing company gains an income, and the company or individual leasing an asset pays regular amounts, which are tax deductible.

Both local companies and foreign firms can benefit from Labuan leasing structures – provided these are established professionally and on an individual basis. We exist to advise, assist and advance you at every stage of your offshore financial venture, so speak to us to discover how Labuan leasing businesses could make a big difference to your business or investment.

OVERVIEW OF A LABUAN LEASING BUSINESS

Many companies need expensive equipment or other high value assets in order to carry out their business. However, purchasing them outright may not always be the most cost-effective way of operating.

It often makes more financial sense to lease these assets, making a series of agreed, tax deductible payments to the owner of the assets in return for their use.

What many companies are unaware of is that they may be paying more than is necessary with their current leasing arrangements. By taking advantage of the innovative leasing structures put in place by the Labuan Financial Services Authority (Labuan FSA), as well as the favourable tax and regulatory environment, many businesses could significantly reduce their operating costs.

DEFINITION OF LEASING

Leasing is defined as a written contract between the leasing company who owns the asset, known as the ‘lessor’ and the individual or company who will be using the asset, known as the ‘lessee’. The lessee pays the lessor an agreed sum over an obligatory period of time in return for the use of asset.

Labuan leasing activities are defined as the business of letting or sub-letting property to a tenant, regardless of whether the tenant has an option to purchase or not. Property is defined as any plant, machinery, equipment, or other chattel attached to the earth. Labuan companies are also allowed to lease ships on a ‘bare boat’ basis.

KEY BENEFITS OF LABUAN LEASING ACTIVITIES

The table below shows the benefits of leasing structures in Labuan.

Asset leased by Resident
to Resident Companies
Asset leased by
Non-Resident to
Non-Resident Companies
Tax payable Subject to a tax rate of 3% or a flat tax of RM 20,000 (or USD 6,700 equivalent).
Withholding tax on dividend paid to the owner No withholding tax on dividends paid by a Labuan Company out of its profits.
Payments of lease rental to Labuan Companies (Lessor) Not subject to withholding tax. Subject to Double Taxation Agreements signed between Malaysia and the relevant jurisdiction.
Tax deduction for lessee Lease rental paid by resident Companies to Labuan Companies are a tax deductible expense. May not be a tax deductible expense.
License fee The fee payable is RM60,000 per annum. For each subsequent transaction, the applicant is required to obtain approval from LABUAN FSA and to pay a fee of RM20,000 once approval is given. No license fee is imposed.


Other benefits include the fact that Labuan is strategically located for carrying out business in the Asian market as it operates on the same time zone as a number of large Asian cities. Labuan IBFC is just a short flight from Kuala Lumpur and Kota Kinabalu and there are plenty of flights daily. In addition to this Labuan also has an excellent infrastructure, and a pool of talented, experienced and multilingual professionals who can help you grow and develop your business.

APPLICATION REQUIREMENTS FOR SETTING UP A LABUAN LEASING BUSINESS

If you are interested in setting up and conducting a leasing business in Labuan you will need to establish or employ a Labuan company or other company registered under the Labuan Companies Act 2010. You can also employ a Special Purpose Vehicle that has been set up to facilitate leasing transactions, including those between companies. Another option is to employ any Malaysian residents who might be interested in conducting the business.

OPERATIONAL REQUIREMENTS FOR SETTING UP A LABUAN LEASING BUSINESS

Any company wishing to set up a leasing business must comply with the following:

  • Maintain bank account(s) under its name preferably in Labuan IBFC and Malaysia to facilitate the leasing operation including lease remittances/lease rental
  • Ensure that the lease agreement is duly stamped and endorsed by the Collector of Stamp Duties, at the Stamp Duty Office, Inland Revenue Board of Malaysia
  • Transact business only in foreign currency and not dealing in Malaysian Ringgit except for the purpose of defraying administrative and statutory expenses or as permitted under Exchange Control Act 1953
  • Notify Labuan FSA of any changes to its constituent documents and business plan within 30 days of the changes being effected
  • Obtain an approval from Labuan FSA on new appointment or change on its directorship and shareholding
  • Notify Labuan FSA on the termination/extension of any leasing transaction within 30 days upon the termination/extension
  • Ensure all leasing transactions and agreements are done through Labuan and adequate and proper records and books of accounts be maintained in Labuan
  • Conduct its business with due diligence and sound principles and comply with the laws and regulations where it services its clients
  • Ensure all its leased assets are adequately insured
  • Ensure that the directors and officers responsible for the management of the company are fit and proper persons pursuant to section 4 of LFSSA and the Guidelines on Fit and Proper Person issued by Labuan FSA
  • Ensure that all leasing transactions with its related party comply with the transfer pricing rules issued by the related party's relevant authorities
  • Comply with any other requirements to be issued by Labuan FSA from time to time

WHY WE ARE THE RIGHT PEOPLE TO HELP YOU SET UP A LABUAN LEASING BUSINESS

We are a fully licensed trust company with a highly experienced team of dedicated professionals. We can help you plan, establish and structure a Labuan leasing business ensuring you get a bespoke service that meets your particular business needs and that your company fulfils all the necessary requirements laid out by the Labuan FSA. We also offer some of the most competitive prices in the industry.

To find out more about how we can help you set up your Labuan leasing business, contact us on our live support or email us at info@labuanborneotrustees.com