One of the significant changes embedded in the amended Labuan Business Activity Tax Act 1990 (LBATA) which came into effect on February 11th 2010 is the introduction of advance tax ruling. Under the provision, any person can apply to the Director General of the Inland Revenue Board for an advance ruling on the tax treatment of an arrangement or transaction if that activity involves a Labuan entity. This means that you know exactly what is your tax obligation prior to setting up, eliminating the element of surprise.
A second change is the inclusion of shipping operations as a Labuan business activity (so long as the operations are carried out in Labuan and outside of Malaysia) which will enjoy the tax benefits accorded to Labuan companies. Similarly, the tax treatment has been expanded to encompass new entities such as Limited Partnerships, Limited Liability Partnerships, Labuan protected cell companies, Labuan Islamic foundations, Labuan Islamic partnerships and Labuan Islamic protected cell companies.
Companies registered in Labuan IBFC enjoy many advantages, from low operational costs to tax-friendly incentives. Through Malaysia’s extensive double tax treaty network – the largest in Asia Pacific – Labuan IBFC companies have double tax agreement (DTA) access to 69 countries.
You can choose to be taxed according to the Labuan Business Activity Tax Act 1990 (LBATA) or the Malaysian Income Tax Act 1967 (ITA). And since the tax system is simple and straightforward, you have peace of mind with the tax certainty.