Tax compliance Labuan entities carrying on other trading activities

Tax compliance requirements for Labuan entities carrying on “other trading” activities

Following the gazettement of the Labuan Business Activity Tax Act (Requirements for Labuan Business Activity) 2018 (Amendment) Regulations 2020 [P.U.(A) 375] on 24 December 2020, the IRB’s Labuan International Unit has issued a letter dated 5 February 2021 to the Association of Labuan Trust Companies. The letter states that Labuan entities carrying on “other trading” activities, which were classified under Code 23 for Labuan Business Activity Tax Act 1990 (LBATA) filing purposes, will be required to submit their income tax return forms (ITRF) under the ITA instead of under the LBATA.

The due dates for the submission of the ITRF under the ITA are as follows:

No penalties will be imposed under Section 112(3) of the ITA if the ITRF are submitted within the stipulated timelines above. Further, no penalties will be imposed for the non-submission of Form CP204 for YA 2019 and YA 2020. However, the Form CP204 for YA 2021 must be submitted as soon as possible.

The letter also stated that in cases where a Labuan entity has remitted any tax payments under the LBATA for the respective YAs, the amount will be transferred to the accounts under the ITA.

This communication is consistent with the IRB’s position that Labuan entities carrying on activities which are not listed in the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 (as amended by the Labuan Business Activity Tax (Requirements for Labuan Business Activity) 2018 (Amendment) Regulations 2020) are to be taxed under the ITA instead of the LBATA.  Labuan entities that had previously filed a tax return under the LBATA for such “other trading activities” should seek professional advice on how to proceed.