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The Impact of the Proposed 2019 Budget on Labuan Company | Corporate Services Trust Co Ltd
We would like to examine the Impact of the Proposed New Labuan Tax measure that allows a Labuan Company to transact with Malaysia Resident but with limited to 3% of the allowable expenditure. To recap the new Pakatan Harapan government first Budget 2019 announced on 02 November 2018 that it will continue to enhance Labuan's competitiveness by removing restrictions on trade in ringgit, transactions between Labuan and Malaysian residents as well as maintaining the current tax rate of 3%. The tax ceiling of RM20,000 under the Labuan Business Activity Tax Act 1990 will be removed. It was also announced that commencing Jan 1, 2019 Malaysian Resident or Malaysian Companies which transact with a Labuan Company is entitled to tax deduction on expenditure incurred, limited to 3% of the allowable expenditure. But what does this 3% allowable expenditure mean? Unlike Labuan company which is tax based on audited net profit, For Malaysia Company the audited net profit is Not the taxable profit. In