Choosing the right business structure is one of the most important financial decisions a foreign entrepreneur can make in Malaysia. Both Sdn. Bhd. (Private Limited Company) and Labuan Company offer unique advantages, but the true cost differences become clear only when you compare tax obligations, running expenses, licensing requirements, banking, visa options, and long-term business strategy.
This guide breaks down the real cost comparison so you can make a financially smart decision from day one.
1. TAX STRUCTURE — THE BIGGEST COST DIFFERENCE
Sdn. Bhd. Tax
- Corporate tax: 24%
- SME tax (if 51% Malaysian-owned): not applicable to foreigners
- Withholding tax on some foreign payments
- Annual audited financial statements required
Sdn. Bhd. is best when:
– income is generated inside Malaysia
– you need Malaysian licenses
– you plan to hire staff locally
Labuan Company Tax
Labuan is one of Asia’s most tax-friendly jurisdictions.
You can choose:
- 3% tax on audited net profit
OR - Flat RM20,000 tax per year
No tax on:
– foreign dividends
– capital gains
– international transactions
Labuan is best when:
– revenue comes from outside Malaysia
– you run an online or international business
– you want low tax + easier compliance
2. SETUP COST & MAINTENANCE FEES
Sdn. Bhd. yearly costs include:
- Company secretary fees
- Audit fees
- Accounting fees
- Tax filing
- Licensing (if required)
Estimated annual cost: RM 8,000 – RM 15,000+
Labuan yearly costs include:
- Labuan license renewal
- Registered agent fee
- RM20,000 tax (if choosing flat tax)
- Audit (if choosing 3% tax option)
Estimated annual cost:
RM 12,000 – RM 25,000+ depending on structure
Labuan can be cheaper IF your revenue is global and you choose flat tax.
3. BANKING & FINANCIAL OPERATIONS
Sdn. Bhd.
- Easier to open bank accounts in Malaysia
- Preferred by Malaysian partners
- Required for local payroll and local invoicing
Labuan Company
- Can open accounts in Labuan, Kuala Lumpur, or overseas
- Some Malaysian banks may have stricter compliance checks
- Best for international transactions and multi-currency banking
4. VISA & WORK PERMIT COSTS
Sdn. Bhd.
Requires:
- ESD registration
- Meeting EP salary requirements
- Paid-up capital recommendation (RM500k – RM1m)
Pros:
– good for long-term residency
– strong credibility
Labuan Company
- Labuan Work Permit (2 years, renewable)
- Lower paid-up capital requirement compared to Sdn. Bhd.
- Faster processing
Pros:
– suitable for entrepreneurs operating globally
– includes Dependent Pass
5. LICENSING IMPACT ON COSTS
Sdn. Bhd. may require:
- WRT License (RM1 mil paid-up capital for trading)
- Sector licenses (education, logistics, F&B, etc.)
Labuan Company:
- CANNOT operate physically in Malaysia
- Must obtain extra licensing if doing business locally
If your business is local → Sdn. Bhd. saves money long-term.
If your business is international → Labuan saves money long-term.
6. WHICH STRUCTURE SAVES YOU MORE MONEY?
Choose Sdn. Bhd. if:
- you operate inside Malaysia
- you sell to Malaysians
- you need local licenses
- you hire staff locally
- you need strong banking reputation
Choose Labuan Company if:
- your income is international
- you want low tax
- you want an easy work permit
- you trade globally
- you want minimal compliance
FINAL VERDICT
Labuan is cheaper long-term for global/international businesses.
Sdn. Bhd. is cheaper long-term for local Malaysian operations.
Choosing the wrong structure can cost your business thousands every year.
Horizon Hub Consulting helps entrepreneurs choose the correct structure based on taxes, licensing, banking, and long-term financial efficiency.
Need Help Choosing the Most Cost-Effective Company Structure?
Horizon Hub Consulting helps you compare Sdn. Bhd. vs Labuan based on tax, compliance, licensing, and long-term savings ensuring you choose the smartest option.
📲 WhatsApp: +60 11-3773 0699
📧 Email: info@horizonhubconsulting.com