Labuan is strategically located within an International shipping and air route between the Indian and the Pacific ocean. It lies only 1,100 kilometers to Singapore which has one of the busiest seaports in the world.

Besides its strategic location and easy accessibility, Labuan has a business-friendly local authority. Government dealings and matters relating to the licensing and approvals are quick and efficient. The strong federal government support to the island provides an added competitive edge to local industries and businesses.

Labuan's other plus factors include modern healthcare, pre-school to university education, excellent housing, exquisite restaurants, active nightlife, traffic free roads, duty free shopping, state-of-the art satellite telecommunication, abundant water and electricity supply, an international offshore financial centre (IOFC) and an educated English-speaking labour force.

Its beautiful beaches, secluded islands and unlimited adventure for sport fishing, kayaking and wrecks diving are well suited for today's busy executive looking for a stress free lifestyle.

Labuan offers plenty of business and investment opportunities particularly in oil and gas, manufacturing, trading, tourism, cargo handling and bunkering, deep sea fishing, offshore finance and education.

Already, many multi-nationals operating in Asia Pacific are realising the strategic fit to re-locate their regional offices in Labuan. The tax benefit offered by Labuan's low tax jurisdiction and the saving on lower financing costs are major considerations. Companies which set up their bases in Labuan are benefitting in terms of better bottom line. The prospects of such benefits and advantages make Labuan an important consideration to corporate Asia in the new millennium.

Incentive For Investment
The Malaysian Government welcomes foreign investment in major sectors of the Labuan economy particularly in oil and gas, shipping, manufacturing, trading, tourism, property and education. There are plenty of incentives and other facilities accorded to these sectors. Some of them are presented as follows:

Manufacturing sector
The major incentives for companies in the manufacturing sector are the Pioneer status or investment tax allowance.

a. Pioneer Status
A company granted Pioneer Status will enjoy partial exemption from the payment of income tax. It will only have to pay tax on 30% of its statutory income. The period of tax exemption is five years, commencing from the production date as determined by the Minister of International Trade and Industry.

b. Investment Tax Allowance
As an alternative to Pioneer Status, a company may apply for investment Tax Allowance. A company granted Investment Tax Allowance will be given an allowance of 60% in respect of qualifying capital expenditure incurred within five years from the date on which the first qualifying capital expenditure is incurred. The allowance can be utilised to offset against 70% of the statutory income in the year of assessment.

High Technology Industries
High technology companies are defined as companies engaged in promoted activities or in the production of promoted products in areas of new and emerging technologies. They are eligible for the following incentives:

a. Pioneer Status with full tax exemption at statutory income level for a period of five years; or

b. Investment Tax Allowance of 60% on qualifying capital expenditure incurred within a period of five years. The allowance can be offset against the statutory income for each assessment year without any restriction.

Incentive For Acquiring Proprietary Rights
Expenditure incurred on acquiring patents, designs, models, plans, trade marks or brands and other similar rights from foreigners is allowed as deduction in the computation of income tax if the right is used without involving the transfer of ownership and results in payment of royalty. This deduction is given in the form of depreciation for 10 years.


Incentive For Strategic Projects
Strategic projects are those with heavy capital investment and high technology, which can generate extensive linkages, and which have significant impact on the Malaysian economy. The Government will consider granting the following incentives to strategic projects of national importance.

a. Pioneer Status with full tax exemption at statutory income level for a period of 10 years; or

b. Investment Tax Allowance of 100% on qualifying capital expenditure incurred within a period of five years. The allowance can be offset against the statutory income for each assessment year without any restriction.
Shipbuilding Industry

Tourism Industry
Various incentives are available to encourage the growth of domestic tourism which include "eco-tourism" and "agro-tourism". These incentives cover tourist projects, hotel businesses, construction of holiday camps and recreational projects including summer camps and construction of convention centres with a hall capable of accommodating at least 3,000 participants. Besides the usual Pioneer Status and Investment Tax Allowance incentives there are other incentives accorde to this sector such as the Industrial Building Allowance, Double Deduction for expenses incurred on approved training, and Deduction for conference promoters.

Incentives For Export
Manufacturers producing for the export market are eligible to apply for export credit refinancing (ECR), double deduction of export credit insurance premiums, double deduction for promotion of exports, tax exemption on the value of increased exports, industrial building allowance (IBA).

Income for software development
In line with the Government's objective to encourage the development of computer software, companies which develop both original and undertake major modifications of existing software other than those deemed established, are eligible to apply for Pioneer Status incentive for a period of five years.

Drawback of import duty
All duty-paid goods used as parts or ingredients or as packaging materials in the manufacture of other goods which are subsequently exported, are eligible for drawback of import duty in full. Movement of goods from the Principal Customs Area to Free Zone or the island of Labuan are regarded as exports. Therefore, such goods, if manufactured in the Principal Custom Areas, will be eligible for drawback of duty.

Immigration Procedures
All persons entering Malaysia must possess valid national passports or other internationally recognised travel documents valid for travel to Malaysia.

Commonwealth citizens (except for India, Bangladesh, Pakistan and Sri Lanka), British protected persons or citizens of the Republic of Ireland and citizens of Switzerland, the Netherlands, San Marino and Liechtenstein do not need a visa to enter Malaysia.

Employment of expatriate personnel
Foreign companies are allowed to bring in expatriate personnel in areas which there is a shortage of trained Malaysians to do the job. In addition, foreign companies are also allowed "key posts", that is, posts that are permanently filled by foreigners.


Employment of foreign workers is allowed in the construction, plantation, service (domestic servants, hotel industry, trainers and instructors) and manufacturing sectors. Only nationals of Bangladesh, Indonesia, Pakistan, the Philippines and Thailand are allowed to be employed. The Foreign Workers Division of the Immigration Department is the approving authority for the employment of foreign workers.

 

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