Introduction

The Labuan Business Activity Tax Act (LBATA) is a key tax legislation in Malaysia that governs Labuan entities. Under this Act, entities carrying out Labuan business activities are taxed according to LBATA, while those outside its scope fall under the Income Tax Act 1967.

What is a Labuan Business Activity?

A Labuan business activity refers to either trading or non-trading activities carried out in, from, or through Labuan. It excludes any activity that is illegal under Malaysian law.

Labuan Trading vs Non-Trading Activities

Substance Requirements

For an entity to fall under LBATA, it must conduct a business listed in the Substance Requirements Order [PU(A) 392/2018], such as:

• Labuan insurer, reinsurer, takaful/retakaful
• Labuan bank, investment bank, Islamic bank
• Labuan leasing or Islamic leasing
• Labuan trust company
• Labuan international commodity trading company
• Labuan fund manager, administrator, or securities licensee
• Holding company (pure or non-pure equity holding)
• Other trading entities like administrative, payroll, legal, or accounting services

Entities that conduct activities not included in this list are taxed under the Income Tax Act 1967, not LBATA.

Key Takeaways

• The Labuan Business Activity Tax Act governs trading and non-trading activities.
• Only entities conducting approved activities under the 2018 Substance Requirements qualify for LBATA.
• Others fall under the Income Tax Act 1967.

FAQ

Q1: What is the tax rate under LBATA?
A: LBATA allows qualifying entities to be taxed at a preferential rate compared to the standard corporate income tax.

Q2: Can Labuan entities trade in Malaysian Ringgit?
A: Yes, Labuan entities may trade in any currency, including the Malaysian Ringgit, and trade with Malaysian residents.

Q3: What happens if my activity is not listed under the Substance Requirements?
A: The entity will be taxed under the Income Tax Act 1967, not LBATA.

ANC Group – Your Personal Tax Advisor

Tax consulting is the core service of ANC Group. Our tax professionals provide clients with comprehensive tax support and guidance. We offer tax consulting and compliance services for expatriates, entrepreneurs, and listed and non-listed companies.

Our tax consulting services include business tax, transaction tax, personal tax, and corporate income tax. We don’t just guide you in interpreting and applying complicated taxation rules, but to explore new opportunities and business trends.

ANC Group keep you abreast with Malaysia tax updates and any changes in the local regulations.

We work closely with industry specialists, authorities, and associated professionals within ANC Group to provide the best-in-class integrated tax planning solutions. ANC specialists coordinate the accounting and taxation services to bring your business to success.

If you need professional tax advisory services regarding the Malaysia Income Tax Act 1967, our team is ready to assist you. Contact us here to discuss how we can support your business.