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Update on pure equity holding Labuan entities
The Labuan Business Activity Tax (Exemption) Order 2020 was gazetted on 2 June 2020 to provide that a pure equity holding Labuan entity is exempted from the application of Section 2B(1)(b)(i) of the Labuan Business Activity Tax Act 1990 (LBATA), i.e., such an entity would not require full-time employees in Labuan (see Tax Alert No. 9/2020).
Pursuant to the Finance Act 2020, Section 2B(1)(b) was amended to update the substance requirements for Labuan entities carrying on “Labuan trading activities” and “Labuan non-trading activities”, effective 1 January 2021. For Labuan entities carrying on a Labuan non-trading activity, the Minister may also prescribe by regulations any condition in relation to control and management in Labuan.
Following the above, the Labuan Business Activity Tax (Exemption) 2020 (Amendment) Order 2021 [P.U.(A) 466] was gazetted on 23 December 2021 to update the reference to the relevant section in the LBATA (i.e., to Section 2B(1)(b)(ii)(A)) exempting a pure equity holding Labuan company from the requirement of having full-time employees in Labuan.
The Amendment Order is deemed to have come into operation on 1 January 2021, i.e., the effective date of the relevant change to the LBATA.