Labuan Entities with Dormant Status: Guidelines on Tax Treatment
The objective of this guideline is to provide clarification on the tax treatment of Labuan entities with dormant status under the Labuan Business Activity Tax Act 1990 [Act 445] as prescribed through the Labuan Investment Committee (LIC) Pronouncement 1-2019 and 2-2019 dated 19 June 2019 and 11 December 2019, respectively.
Labuan entity is considered dormant if it:
(i) Filing of the company’s annual return;
(ii) Secretarial fee for filing of the company’s annual return;
(iii) Tax filing fee;
(iv) Audit fee; and
(v) Accounting fee.
Labuan entity is NOT considered as dormant if it owns shares, real properties, fixed, deposits, and other similar investments including income such as rents, interest, etc. (if any) received by virtue of the mentioned ownership.
Labuan entities that are dormant or struck off, including those under winding up proceedings or under liquidation process, which do not derive any source of income need not comply with substance requirements. However, if Labuan entities resume operations, substance requirements must be complied with until the last date of the accounting period.
The responsibilities of Labuan entities that are dormant under Act 445 are as follows:
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Labuan Entities |
Documents to be Submitted |
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Dormant / under liquidation process
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•Audited accounts (if any) / management accounts
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Deemed effective from Year of Assessment 2020.
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