The Labuan Business Activity Tax (Exemption) Order 2020

The Labuan Business Activity Tax (Exemption) Order 2020 (“Labuan Exemption Order”) has been gazetted on 2 June 2020 to exempt a Labuan entity carrying on a Labuan business activity related to pure equity holding, from complying with the requirement for an adequate number of full time employees in Labuan. The Labuan Exemption Order is deemed to have come into operation on 1 January 2019.

The above is consistent with the Labuan Investment Committee’s decisions set out in its “Pronouncement 2-2019” dated 11 December 2019 and the “Clarification to Pronouncement 2-2019” dated 20 December 2019 (“the Pronouncements”). It was also indicated in the Pronouncements that a Labuan entity that undertakes pure equity holding activities should comply with the requirements for management and control as well as for minimum annual operating expenditure. However, specific rules on the imposition of the substantial activity requirements for a Labuan entity that undertakes pure equity holding activities, have yet to be issued.

You can reach us to review the impact the proposed substantial activity requirements for your Labuan entity undertaking a pure equity holding activity.