Other incentives for Labuan.

To promote Labuan as an international financial centre, the Malaysian Government has granted incentives in the form of tax and stamp duty exemptions or fee reduction for individuals and companies carrying out business activities in Labuan.

Stamp duty exemption

All instruments which are executed by an offshore company in connection with an offshore business activity shall be exempted from stamp duty previously chargeable under the Stamp Act 1949.

65% abatement for professional services Income

With effect from the year of assessment 1997, 65% tax abatement is granted on income derived from the provision of professional services in Labuan to an offshore company. This abatement is granted for each year of assessment up to year of assessment 2010. "Professional services" mean legal, accounting, financial or secretarial services including the services provided by a trust company.

50% tax abatement for foreign managers

50% tax abatement on income earned by non-citizens employed in managerial capacity in Labuan has been extended to the year of assessment 2010. In addition, 50% of the gross income of a non-resident manager working for a Labuan trust company is exempted from tax from the year of assessment 1998 to the year of assessment 2010.

Tax exemption for non-residents

With effect from the year of assessment 1998 to the year of assessment 2010, Malaysian residents working in the public sector and offshore companies in Labuan enjoy 50% exemption on housing and regional allowance.

Further, a non-resident is exempted from tax in respect of income from the use of any moveable property by an offshore company licensed under the Offshore Banking Act 1990 or approved by LOFSA to carry out leasing business in Labuan.

Tax exemption for expatriate directors

With effect from the year of assessment 2002 to the year of assessment 2010, any income from fees received by a non-citizen individual in his capacity as a director of an offshore company will be exempted from income tax.

Tax-exempt receipts

The following receipts are exempt from income tax;

1. dividends received by an offshore company;
2. dividends received from an offshore company which are paid, credited or distributed out of income derived from an offshore business activity or income exempt from tax;
3. distributions received from an offshore trust by the beneficiaries;

Service tax

Services tax does not apply to Labuan.[1] Therefore service providers like trust companies, lawyers and accountants do not have to collect and account for service tax.