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Trust & Corporate Services Manager, TMF Labuan
20 June 2018
Read time
3 minutes

New guidelines for leasing businesses in Labuan, Malaysia

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In order to improve the economy and to realign Labuan’s fiscal rules with Base Erosion and Profit Shifting (BEPS), the Labuan Financial Services Authority (LFSA) has released new guidelines for setting up leasing businesses.

If your company is considering starting a leasing business, or is already running one, you will need to understand these new guidelines.

Many companies are showing interest in establishing leasing businesses in Labuan based on growing demand for aircraft fleets, as well as specialised equipment and vessels in the oil and gas industry. In 2017, Labuan registered a total of US$48.8 bn in total leased assets, with a 57% coming from the oil and gas sector.

The new guidelines came into effect on 1 January 2018 with two substantive changes. Here’s what you should know:

1. By 1 January 2019, a Labuan leasing company must establish significant business activities and functions in Labuan with the following requirements.

  • The company must maintain an operational office in Labuan.
  • The office must conduct core revenue generating activities including identifying and acquiring an asset, soliciting and negotiating leasing terms, managing leased assets, and professional services such as tax and legal.
  • The company must employ at least one full-time employee with related skills or experience in the field. By 2021, the number of employees required will be increased to two.
  • The company must incur adequate business spending in Malaysia including Labuan.

2. An annual license fee and approval fee for leasing transactions will be payable to LFSA activities by both Malaysian residents and non-residents.

Type of Fee Amount (RM)
Annual license fee 60,000
Each subsequent approved leasing transaction 20,000

A summary of requirements to run a leasing business in Labuan

To comply with the new requirements, directors and officers responsible for managing the company in Labuan must meet the Fit and Proper Person requirements as specified by LFSA.

In addition companies must:

  • have sufficient and positive capital or working funds
  • establish an adequate set of internal policies and controls for its operations, compliances, corporate governance and risk management
  • ensure that all leased assets are adequately insured
  • maintain adequate and proper records and books of accounts in Labuan
    maintain bank account(s) under its name preferably in Labuan IBFC and/or Malaysia
  • have lease agreements stamped and endorsed by the Collector of Stamp Duties, at the Stamp Duty Office of Inland Revenue Board of Malaysia, Labuan branch
  • ensure that all leasing transactions with any related party are conducted at arm’s length and are subjected to the transfer pricing rules and guidelines issued by the relevant authorities

TMF Group can help

With the introduction of new guidelines, you may want to consider having an in-depth knowledge and local expertise in order to comply with the requirements and save time. 

TMF Labuan has specialists who offer a wide range of corporate services to help companies navigate rules and regulations. We offer a depth of knowledge and expertise you need to adapt your business in Labuan.

If you want to know more about the new guidelines, talk to us today.

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