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

Last Updated: 11 January 2018
Article by Labuan IBFC Inc.

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Note for Guidelines on the Establishment and Operations of Labuan Leasing Business (issued on 10 October 2013) are now repealed.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

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”

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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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