LABUAN BUSINESS ACTIVITY TAX ACT 1990

LAWS OF MALAYSIA ONLINE VERSION OF UPDATED TEXT OF REPRINT Act 445 LABUAN BUSINESS ACTIVITY TAX ACT 1990 As at 1 January 2026 This text is ONLY AN UPDATED TEXT of the Labuan Business Activity Tax Act 1990 by the Attorney General’s Chambers. Unless and until reprinted pursuant to the powers of the Commissioner of Law Revision under subsection 14(1) of the Revision of Laws Act 1968 [Act 1], this text is NOT AN AUTHENTIC TEXT. 2 LABUAN BUSINESS ACTIVITY TAX ACT 1990 Date of Royal Assent … … … ... 22 August 1990 Date of publication in the Gazette … … … ... 30 August 1990 Latest amendment made by Act Act 875 which came into operation on … … … ... See section 31 PREVIOUS REPRINTS First Reprint … … … … … 2001 Second Reprint … … … … … 2006 3 LAWS OF MALAYSIA Act 445 LABUAN BUSINESS ACTIVITY TAX ACT 1990 ARRANGEMENT OF SECTIONS PART I PRELIMINARY Section 1. Short title and commencement 2. Interpretation 2A. Designated Labuan business activity 2B. Labuan entity PART II CHARGEABILITY TO TAX Scope of Charge 3. Labuan business activity chargeable to tax 3A. Labuan business activity chargeable to Income Tax Act 1967 upon election 3 B. Residence Tax based on Return 4. Labuan trading activity 5. Filing of return of profits of Labuan entity charged to tax 6. Assessment and additional assessment 4 Laws of Malaysia ACT 445 Section 6A. Form and making of assessments 6 B. Notice of assessment 6 C. Finality of assessment 6D. Right of appeal Tax charged upon Election 7. (Deleted) 8. Absence of basis period 8A. Tax rebate PART III NON-CHARGEABILITY TO TAX 9. Labuan non-trading activity 10. Filing of return of profits of Labuan entity not charged to tax 10A. (Deleted) PART IV PAYMENT AND RECOVERY OF TAX 11. Payment of tax 12. Payment of difference and refund 12A. Fund for Tax Refund 13. (Deleted) 13A. (Deleted) 13B. Tax payable notwithstanding proceedings instituted under any other written law 14. Recovery by suit Labuan Business Activity Tax PART V RESPONSIBILITY FOR COMPLIANCE Section 15. Person chargeable 16. Officers responsible for compliance 16A. Director’s liability PART VI SUPPLEMENTAL Administration 17. The Director General 17A. Power of Director General to issue guidelines 17B. Advance ruling 17C. Power to disregard certain transactions 17D. Power to substitute the price on certain transactions 18. Delegation of Director General’s functions 18A. Authorized officer 19. Power of Minister to give directions 20. Return of profits, etc., to be treated as confidential 21. Power of Minister to make regulations 21A. Forms 21B. Admissibility of electronic record 21C. Electronic medium Miscellaneous 22. Power to call for information 22A. Disclosure of information in certain circumstances 22B. Power to call for specific returns and production of books 22C. Power to call for statement of bank accounts, etc. 5 6 Laws of Malaysia ACT 445 Section 22D. Power to access buildings and documents, etc. 22DA. Duty to issue electronic invoice 22E. Duty to keep documents for ascertaining chargeable profit and tax payable 22EA. Failure to issue electronic invoice 22EB. Duty to provide information and furnish documents for ascertaining chargeable profit and tax payable 22F. Prosecution 23. Offences and penalties 23A. Default in furnishing return of profits 23B. Penalty for incorrect return of profits and information 23C. Recovery of penalty 24. Compounding of offences 25. (Deleted) 26. Exemption by Minister 27. Service of documents 27A. Evidential provisions 27B. Errors and defects in assessments, notices and other documents 27C. Authentication of notices, certificates and other documents 28. Procedure where none laid down SCHEDULE 7 LAWS OF MALAYSIA Act 445 LABUAN BUSINESS ACTIVITY TAX ACT 1990 An Act to provide for the imposition, assessment and collection of tax on a Labuan business activity carried on by a Labuan entity in or from Labuan and for matters connected therewith. [1 October 1990, P.U. (B) 589/1990] BE IT ENACTED by Seri Paduka Baginda Yang di-Pertuan Agong with the advice and consent of the Dewan Negara and Dewan Rakyat in Parliament assembled, and by the authority of the same, as follows: PART I PRELIMINARY Short title and commencement 1. (1) This Act may be cited as the Labuan Business Activity Tax Act 1990 and shall come into force on such date as the Minister may, by notification in the Gazette, appoint. (2) This Act shall have effect for the year of assessment 1991 and subsequent years of assessment. Interpretation 2. (1) In this Act, unless the context otherwise requires— “assessment” means any assessment or additional assessment made under this Act; 8 Laws of Malaysia ACT 445 “basis period”, in relation to a year of assessment, means the accounting period or periods ending in the calendar year coinciding with that year of assessment; “Director General” means the Director General of Inland Revenue referred to in section 134 of the Income Tax Act 1967 [Act 53]; “electronic invoice” has the meaning assigned to it in the Income Tax Act 1967; “Labuan” means the Federal Territory of Labuan; “Labuan business activity” means a Labuan trading or a Labuan non-trading activity carried on in, from or through Labuan, excluding any activity which is an offence under any written law; “Labuan company” means a Labuan company incorporated under the Labuan Companies Act 1990, and includes a foreign Labuan company registered under that Act; “Labuan non-trading activity” means an activity relating to the holding of investments in securities, stock, shares, loans, deposits or any other properties situated in Labuan by a Labuan entity on its own behalf; “Labuan trading activity” includes banking, insurance, trading, management, licensing, or any other activity which is not a Labuan non-trading activity; “Minister” means the Minister for the time being charged with the responsibility for finance; “official” means a person having an official duty under, or employed in carrying out, the provisions of the Income Tax Act 1967; “person” includes a corporation, a partnership, a body of persons and a corporation sole; Labuan Business Activity Tax 9 “Special Commissioners” means the Special Commissioners of Income Tax appointed under section 98 of the Income Tax Act 1967; “year of assessment” means calendar year. (2) Where a Labuan entity carries on both a Labuan trading activity and a Labuan non-trading activity, such entity shall be deemed to be carrying on a Labuan trading activity. (3) For the avoidance of doubt, it is declared that the provisions of the Income Tax Act 1967 shall apply in respect of— (a) an activity other than a Labuan business activity carried on by a Labuan entity; and (b) (Deleted by Act 624); (c) (Deleted by Act A1366); (d) a Labuan business activity carried on by a Labuan entity which makes an election under section 3A. Designated Labuan business activity 2A. (1) The Minister may, on the recommendation of the Director General, in writing, designate any activity carried on by any Labuan entity to be a Labuan business activity. (2) (Deleted by Act 812). Labuan entity 2B. (1) The Labuan entities— (a) shall be as specified in the Schedule; and (b) shall, for the purpose of the Labuan business activity— 10 Laws of Malaysia ACT 445 (i) in relation to a Labuan trading activity— (A) have an adequate number of full time employees in Labuan; (B) have an adequate amount of annual operating expenditure in Labuan; and (C) comply with any condition in relation to a fit and proper person for full time employees, as prescribed by the Minister by regulations made under this Act; and (ii) in relation to a Labuan non-trading activity— (A) have an adequate number of full time employees in Labuan; (B) have an adequate amount of annual operating expenditure in Labuan; (C) comply with any condition in relation to control and management in Labuan; and (D) comply with any condition in relation to a fit and proper person for full time employees, as prescribed by the Minister by regulations made under this Act. (1A) A Labuan entity carrying on a Labuan business activity which fails to comply with regulations made under subsection (1) for a basis period for a year of assessment shall be charged to tax at the rate of twenty four per cent upon its chargeable profits for that year of assessment. (1B) For the purposes of subsection (1A), the chargeable profits shall be the net profits as reflected in the audited accounts in respect of such Labuan Business Activity Tax 11 Labuan business activity of the Labuan entity for the basis period for that year of assessment. (1C) The net profits referred to in subsection (1B) shall not include any income derived from royalty and other income derived from an intellectual property right if it is receivable as consideration for the commercial exploitation of that right. (1D) Any income derived from intellectual property right referred to in subsection (1C) is subject to tax under the Income Tax Act 1967. (1E) In this section, “intellectual property right” has the same meaning assigned to it under subsection 4(5). (2) The Minister may, upon the recommendation of the Director General, by order published in the Gazette, amend the Schedule including for the purposes of declaring any other person as a Labuan entity. PART II CHARGEABILITY TO TAX Scope of Charge Labuan business activity chargeable to tax 3. (1) Subject to this Act, a Labuan entity carrying on a Labuan business activity shall be charged to tax in accordance with this Act for each year of assessment in respect of that Labuan business activity. (2) Notwithstanding any other provisions of this Act and for the purposes of the imposition of Domestic Top-up Tax or Multinational Top-up Tax and the implementation of the GloBE Rules, Part XI of the Income Tax Act 1967 shall also apply to a Labuan entity which is a Constituent Entity that is a member of a Multinational Enterprise Group that has annual revenue of seven hundred and fifty million euro or more in the Consolidated Financial Statements of the Ultimate 12 Laws of Malaysia ACT 445 Parent Entity in at least two of the four consecutive Financial Years immediately preceding the tested Financial Year. (3) Where one or more of the Financial Years of the Multinational Enterprise Group taken into account for the purposes of subsection (2) is of a period other than twelve months, for each of those Financial Years the seven hundred and fifty million euro annual revenue is adjusted proportionally to correspond with the length of the relevant Financial Year. (4) For the purposes of subsections (2) and (3), “Consolidated Financial Statement”, “Constituent Entity”, “Financial Year”, “GloBE Rules”, “Multinational Enterprise Group” and “Ultimate Parent Entity” have the meaning assigned to them in Part XI of the Income Tax Act 1967. Labuan business activity chargeable to Income Tax Act 1967 upon election 3A. (1) Notwithstanding any other provision of this Act, a Labuan entity carrying on a Labuan business activity may make an irrevocable election in the form as determined by the Director General that any profit of the Labuan entity for any basis period for a year of assessment and subsequent basis period to be charged to tax in accordance with the Income Tax Act 1967 in respect of that Labuan business activity. (2) The election referred to in subsection (1) shall be made and furnished to the Director General within three months or any extended period as may be allowed by the Director General after the beginning of the basis period for a year of assessment: Provided that for the basis period ending on a day in the year of assessment 2008, the election under this section may be made and furnished before 1 August 2008. Labuan Business Activity Tax 13 Residence 3B. For the purposes of the double taxation