Looking to start a factoring business in Malaysia? Labuan’s low tax benefits and fully compliant business centre labeled by OECD as a “white-list” jurisdiction could be the right set-up for your factoring business in Malaysia! A new set-up to capture Asia businesses is a wise choice as it will allow you to benefit from the many offshore advantages. Operate a new or extended wing in Labuan for your existing operations in other jurisdictions may also prove to be beneficial!

A factoring transaction is one in which a business sells its invoices, or receivables, to a 3rd party financial company known as a “factoring company”. Invoices are sold at a discounted price to receive cash quickly on their receivables, rather than waiting for the 30 – 60 days period for a customer to make payment. The debt is transferred to the factoring company who will then approach the client to collect the invoices in full amount, earning the difference.

Factoring business is one of the oldest forms of business financing and an important financial tool to companies to quickly build up their cash flow, which makes it easier to pay employees, handle customer orders and to grow the business!

Structuring your Labuan Factoring Business is key in operating efficiently and in accordance with Labuan FSA guidelines:

Set up a Labuan Factoring Business - Structure Explained | QX Trust | Offshore Labuan Consultants

Key Advantages of A Labuan Factoring License

  • 100% foreign ownership!
  • Significant tax benefits – 3% on net profit!
  • Engage with multiple businesses worldwide in various currencies easily!
  • ZERO withholding tax on payments of dividend and interest paid out!
  • No import duty / sales tax.
  • No foreign exchange controls.
  • No capital gain tax / inheritance tax.
  • Double Tax Agreements between Malaysia and over 70 countries.
  • No stamp duty on all instruments relating to offshore business activities including share transfer.
  • 50% tax abatement for expatriate professionals and managers employed under Labuan Factoring Business Company
  • 100% exemption for director’s fees received by non-citizen directors of Labuan Factoring Business Company
  • Stringent privacy policy by the strict confidentiality legislation offered by Labuan IBFC

Requirements for A Labuan Factoring License

One is eligible as long as the minimum requirements for a Labuan Factoring Business license is fulfilled:-
  1. A Labuan company incorporated under the Labuan Companies Act 1990
  2. Factoring company registered under Banking and Financial Institutions Act 1989
  3. Special Purpose Vehicle (SPV) to facilitate inter-company factoring transactions
  4. No adverse report from any reliable sources

Important Documents to Submit for A Labuan Factoring License Application

  1. A three (3) years Business Plan with Financial Forecast and Operational Strategies
  2. Organisation chart with board of directors and senior management
  3. Prior written approval by Labuan FSA for the appointment of Directors, Controller or CEO
  4. Audited Financial Statements for the past two (2) years (if applicable)
  5. Letter of Undertaking from the head office / parent company

Regulatory and Operational Requirements for Labuan Factoring License

  1. Option to either set up an office in Labuan or operate through its registered office
  2. All transactions must be transacted through Labuan with adequate and proper records including books of accounts must be maintained in Labuan
  3. All transactions in foreign currencies, including Malaysian Ringgit
  4. Transactions with Malaysian residents are permissible including those approved by Central Bank of Malaysia
  5. Maintain sufficient capital to manage the company’s daily operations
  6. Appoint an auditor and have accounts audited
  7. Submit to Labuan FSA the audited annual financial statements and other required information including, prudential information, general business conducts and volume and direction of business in Labuan
  8. Notify Labuan FSA of any amendments to constituent documents, shareholdings, management or business plan
  9. Conduct business with due diligence and sound principles and comply with the local laws and regulations
  10. Yearly license fee payable to Labuan FSA at MYR 40,000 or MYR 60,000 (for those without physical presence in Labuan)

Application Timeframe

  1. Approximately 30 to 60 days, subject to further information and supporting documents required by Labuan FSA during the approval process
  2. Interviews / Meetings with the key personnel may be requested by the Labuan FSA to understand or clarify certain processes

STEPS to Apply for A Labuan Factoring License

Process flow for Obtaining A Labuan Factoring Licence | QX Trust - Offshore Labuan

QX TRUST, your one-stop Trust Company in Labuan!

QX TRUST license application service level for Labuan Factoring license include:

  • Consultation on client's eligibility and application procedures
  • Feasibility study write-up based on client's profile
  • Due Diligence, Profiling and Guidance on documents preparation
  • Construct exclusive Business Plan to meet client's objectives
  • Preparation of Financial Forecast, KYC, Operation and AML/CFT Manuals, Client Agreements etc
  • Submission and supervision of application process until approval
  • Act as liaison and key contact person for both client and Labuan FSA on all correspondences, meetings and /or interviews (if any)