The Inland Revenue Board (IRB) is now scrutinising Malaysian companies that have Labuan businesses. Tax consultants say that this is probably due to focus on Base Erosion and Profit Shifting, which has led the IRB to check if there are companies misusing Labuan’s preferential treatment.

Companies are now required to declare in their tax return (Form C) whether or not they have a Labuan subsidiary or related company. This declaration was introduced in the Form C a few months ago. IRB is also taking a substance over form approach and has challenged in court the authenticity of companies set up for business in Labuan, questioning whether these companies have commercial or economic substance.

Experts have advised that it is important that companies maintain their document trails in respect of their Labuan companies.

Source: The Edge Malaysia, 17 October 2016