Malaysia: Guidelines On The Establishment And Operations Of Labuan Leasing Business

Last Updated: 11 January 2018
Article by Labuan IBFC Inc.
Most Read Contributor in Malaysia, December 2018

1.0 Introduction

1.1 The purpose of the Guidelines is to clarify the application procedure, operational and regulatory requirements for Labuan companies carrying out leasing business1 in Labuan International Business and Financial Centre (IBFC).

1.2 "Leasing business" is defined as the business of letting or sub-letting property on hire for the purpose of the use of such property by the hirer regardless whether the letting is with or without an option to purchase the property2, including charters of ships (bare-boat basis). The assets leased under Labuan leasing business are expected to be big ticket items of high value or specialised assets.

2.0 Applicability

2.1 The Guidelines is applicable to all Labuan companies carrying out leasing business in Labuan IBFC pursuant to Sections 90 and 92 of the Labuan Financial Services and Securities Act 2010 (LFSSA) and Sections 65 and 67 of the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA).

2.2 The Guidelines shall exclude and not applicable for the underlying leasing transactions which are done for the purpose of facilitating the issuance of Sukuk Al-Ijarah. Nonetheless, ijarah leasing business shall observe all the requirements of the Guidelines.

3.0 Legal Provision

3.1 The Guidelines is issued pursuant to Section 4A of the Labuan Financial Services Authority Act 1996 (LFSAA) to clarify the requirements on the establishment and operations of Labuan leasing company licensed under Section 92 of LFSSA and Section 67 of LIFSSA, respectively.

3.2 Any person who fails to comply with the Guidelines commits an offence upon which Labuan FSA may undertake appropriate enforcement action to the extent provided by the law.

4.0 Effective Date

4.1 Save for Paragraph 7.11, all requirements of the Guidelines shall come into effect on 1 January 2018. The substance requirements by the Labuan leasing companies under Paragraph 7.11 shall come into effect on 1 January 2019 to provide sufficient transition period for compliance.

4.2 The Guidelines on the Establishment and Operations of Labuan Leasing Business (issued on 1 August 2013) and Clarification Note for Guidelines on the Establishment and Operations of Labuan Leasing Business (issued on 10 October 2013) are now repealed.

4.3 All approvals granted by Labuan FSA relating to Labuan leasing business before the effective date of this Guidelines shall remain valid unless otherwise revoked or if the lease transaction has expired.

5.0 Eligibility

5.1 Any person intending to undertake leasing business in Labuan IBFC may apply to Labuan FSA for approval.

5.2 Upon receiving approval from Labuan FSA, the applicant is required to establish a Labuan company incorporated or registered under the Labuan Companies Act 1990 (LCA).

6.0 Application Requirements

6.1 Submit a duly completed application form with the relevant supporting documents as stipulated in the Form LFB-Leasing, which is downloadable at

6.2 Labuan FSA may require from the applicant such other information or documents for the purpose of determining the merits of the application.

7.0 Operational Requirements

7.1 Have sufficient and positive capital or working funds which commensurates with the Labuan leasing business3 at all times. Labuan FSA may exercise its discretion to require a Labuan leasing company to inject additional capital, taking into account its business profile as well as nature, scale, complexity and diversity of their business activities.

7.2 Ensure that the directors and officers responsible for the management of the company meet the Fit and Proper Person requirements as specified in the Guidelines on Fit and Proper Requirements issued by Labuan FSA.

7.3 Establish an adequate set of internal policies and controls for its operations, compliances, corporate governance and risk management. These need to be regularly reviewed to ensure that they remain appropriate, relevant and prudent.

7.4 Ensure that all its leased assets are adequately insured. In this regard, Labuan leasing companies are encouraged to primarily secure the insurance coverage for their leased assets/properties from Labuan-based insurance companies and takaful operators prior to securing the services of other insurance players elsewhere. For this purpose, the requirement of paragraph 7.12 would need to be observed prior to entering into such insurance arrangement.

7.5 Maintain adequate and proper records and books of accounts in Labuan in line with the Directive on Accounts and Record-keeping Requirement for Labuan Entities issued by Labuan FSA. Its name and company number must be clearly indicated on its letterhead, stationery and other documents.

7.6 Maintain bank account(s) under its name preferably in Labuan IBFC and/or Malaysia to facilitate the leasing operations including any lease remittances/lease rental payment transactions.

7.7 The lease agreement shall be stamped and endorsed by the Collector of Stamp Duties, at the Stamp Duty Office of Inland Revenue Board of Malaysia, Labuan branch.

7.8 Ensure that all leasing transactions with any of its related party are conducted at arm's length basis and are subjected to the transfer pricing rules and guidelines issued by the relevant authorities.

7.9 Obtain prior approval from Labuan FSA for:

  1. each new and subsequent leasing transactions. In this regard, no leasing transaction shall be undertaken prior to Labuan FSA's approval;
  2. establishment of office outside Labuan and establishment or acquisition of subsidiary;
  3. change of lessee and leased asset;
  4. change of shareholders of more than ten per centum; and
  5. appointment of directors.

7.10 Notify Labuan FSA within 30 days pertaining to the following matters:

  1. resignation of directors;
  2. any change of information with regard to the place of business or office in Labuan;
  3. any changes to the constituent documents and business plan which is not tantamount to the change of lessee and leased asset. This may include the change of its company name; and
  4. termination / extension of any leasing transactions.

7.11 The Labuan leasing company has to establish substantial activities and perform strategic functions in Labuan. In this regard, the substance requirements should include but not limited to the following factors:

  1. Physical presence: Maintain an operational office in Labuan. The operational office should be used for business purposes only and must be appropriately furnished with office equipments4;
  2. Key leasing activities: The core income generating activities are expected to be carried out from the Labuan office. Typically, the activities may include identifying and acquiring of assets to be leased, negotiating leasing terms, soliciting lessees, management of leased assets and financing the acquisition of assets;
  3. Employment: Have adequate number of full-time employees with necessary qualification, skills or experiences in the relevant fields related to the leasing business3; and
  4. Annual business spending: Have incurred adequate business spending in Malaysia including Labuan in undertaking the Labuan leasing business3.

7.12 Comply with applicable laws, rules and regulations relevant to the leasing business, including relevant guidelines issued by Labuan FSA and regulatory requirements of the jurisdictions where Labuan leasing business is authorised to operate in (where applicable). Labuan leasing company is expected to obtain necessary approvals from the relevant authorities in the market it intends to operate prior to commencing its business in those respective markets and provide a copy of the approvals to Labuan FSA.

8.0 Reporting Requirements

8.1 A Labuan leasing company is required to:

  1. appoint an approved external auditor to undertake an audit in respect of its accounts and business operations;
  2. submit one (1) hardcopy and one (1) softcopy of its audited financial statements to Labuan FSA within six (6) months after the close of each financial year; and
  3. provide statistics and information as may be required by Labuan FSA from time to time.

9.0 Fee Payable

9.1 The annual licence fee and approval fee for each subsequent leasing transaction are payable to Labuan FSA to undertake a Labuan leasing business dealing with Malaysian resident and non-resident. Pursuant to Section 189 of LFSSA and Section 150 of LIFSSA, the payment of annual licence fee is payable latest by 15 January of each year.

Type of Fee Amount (RM)
Annual licence fee 60,000
Each subsequent approved leasing transaction 20,000

10.0 Submission of Application and Enquiries

10.1 The application for Labuan leasing business can be submitted to:

Head of Business Operations Unit
Legal and Business Management Department
Labuan FSA
Level 17, Main Office Tower
Financial Park Complex, Jalan Merdeka
87000 Federal Territory of Labuan, Malaysia

10.2 Any enquiries or clarifications may be directed to the following contact details:

Telephone : +6087 591 200
Facsimile no. : +6087 453 442 / 422 300
Email : (Application) (Guidelines)


1. including Islamic leasing business that is in compliant with Shariah principles.

2. including any plant, machinery, equipment or other chattel attached or to be attached to the earth.

3. Considerations shall include but not limited to the following factors:

(i) volume of the business;

(ii) value of the asset leased; and

(iii) leasing arrangement, i.e. operating or finance lease.

4. For a group with more than one Labuan leasing companies may share the same office.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions