19 Nov 2018
MALAYSIA: Labuan Businesses Set to Lose Flat Rate Tax Option
As of 1 January next year, businesses based in the federal territory of Labuan will no longer be entitled to pay tax at a flat rate of RM20,000 (US$4,784) per annum. This ends the current practice of giving companies the option of either paying the stipulated fixed amount or being taxed at a rate of 3% of their net audited profits.
By way of some compensation, Labuan-based businesses will now qualify to pay tax at the preferential 3% rate even if they carry out transactions in the domestic currency and/or undertake commercial activity with Malaysian residents. At present, only transactions conducted in foreign currencies between Labuan-based entities or between Labuan companies and overseas businesses are qualified for the preferential rate.