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Labuan: Domestic Corporate Taxation

Introduction

The Ministry of Finance coordinates the Malaysian Government's tax system through the Inland Revenue Department and the Customs and Excise Department. The main taxes are income taxes on companies and individuals; indirect taxes such as sales tax, service tax, and customs and excise duties; estate and stamp duties; and real property gains tax. The Malaysian tax year is the calendar year. There is no tax on capital gains, with the exception of a tax on the gain from real property held for less than five years.

There are stamp duties and some excise duties. Sales tax at 10% is levied on goods imported for local consumption and on locally-manufactured goods. There is also a service tax of 6% on restaurants, hotels etc.

In the 2005 budget, it was announced that the sales and service taxes would be replaced with a single consumption tax, the goods and services tax (GST). This was scheduled to take place in January 2007, but the Government has postponed implementation of the tax several times, and as of early 2013 it is still unclear if or when the GST will be introduced.

There are a number of fiscal incentives to encourage domestic and foreign investors to establish business operations in Malaysia, and in 2007 the Government announced a generous package of tax breaks for the investment industry in an attempt to consolidate and build upon Malaysia's position as one of the leading centres for Islamic finance.

As a result of the 2007 Budget measures, fund management companies were to be given income tax exemption on all fees received for Islamic fund management activities until the 2016 year of assessment.

Special rules apply to Labuan offshore entities

Although Malaysia itself is not regarded as a low-tax jurisdiction, in addition to Labuan it does have a number of tax-friendly incentive regimes, which are described here.

 

 

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