The Labuan Business Activity Tax Act 1990 (LBATA, latest amendment Act 833/2021) came into force in 1990 and is administered jointly by the Ministry of Finance of Malaysia, the Inland Revenue Board and Labuan FSA.

Tax arrangements relating to captive insurers:

1. A Labuan entity (including a captive insurer) carrying on a trading activity is taxed at 3% of audited net profits; non-trading activities are exempt from tax.

2. The former tax option of a fixed payment of RM20,000 per year was abolished with effect from 1 January 2019.

3. To benefit from the 3% concessionary rate, economic substance requirements must be met (sufficient local employees and operating expenditure in Labuan); otherwise the standard 24% rate applies.

4. A captive insurer may alternatively elect, under section 3A, to be taxed under the Income Tax Act 1967.

Legislation text:LBATA 1990 (Labuan FSA website)