Labuan Certificate of Residence (COR)

1. Access to DTA Benefits: Malaysia has signed DTAs with over 70 countries worldwide. A Labuan COR allows your Labuan entity to access reduced tax rates on income such as dividends, interest, and royalties. Without this certification, your entity may face double taxation in both Malaysia and the foreign country.

2. Avoiding Double Taxation: The COR confirms that your Labuan entity is considered a tax resident in Malaysia, which is essential for claiming tax credits or exemptions on income that may otherwise be taxed twice – once in Malaysia and again in the foreign jurisdiction.

3. International Business Expansion: If you are expanding your business internationally or conducting business with foreign partners, the COR ensures that your Labuan company can operate efficiently by minimizing the tax burden associated with cross-border transactions.

4. Compliance and Transparency: The COR helps establish the legitimacy of your Labuan company as a Malaysian tax-resident entity, which can enhance trust and transparency in international dealings, particularly with regulatory bodies and foreign tax authorities.

Obtaining a Labuan Certificate of Residence (COR) requires that your Labuan entity meets certain conditions set by the Inland Revenue Board (IRB) of Malaysia. Here are the general steps involved in the process:

1. Submission of Required Documents:

   • A completed application form.

   • Certified copies of your company’s incorporation documents.

   • Audited financial statements to demonstrate that your company meets the economic substance requirements in Labuan.

2. Economic Substance Requirements:

   • To qualify for a COR, your Labuan entity must have substantial business activities in Labuan. This includes maintaining a physical office, hiring a minimum number of employees, and incurring a specified level of operational expenditure in Labuan, depending on the type of business.

3. Approval from the IRB:

   • The IRB will review your application and, upon successful verification, issue the Labuan Certificate of Residence.

• Economic Substance: The Labuan entity must have sufficient economic substance in Labuan to qualify for the COR. This includes maintaining a registered office, employing local staff, and meeting other operational requirements.

• Timely Filing of Accounts: The company’s financial records and tax filings must be up-to-date. Failure to submit audited financial statements or comply with tax obligations may delay or prevent the issuance of the COR.

• Annual Renewal: The Labuan COR is typically valid for one year. To continue benefiting from Malaysia’s DTAs, your Labuan company will need to renew the COR annually.