EOT for submission of tax returns under the LBATA for YA 2021

Extension of time for submission of tax returns under the Labuan Business Activity Tax Act 1990 (LBATA) for the year of assessment 2021

The Inland Revenue Board (IRB) has issued a letter dated 11 March 2021 to the Association of Labuan Trust Companies (ALTC) to confirm that Labuan entities would be granted an automatic extension of time until 31 August 2021 to submit their tax returns for YA 2021 (based on the financial year ended in 2020). The extension will only apply to Labuan entities which are up to date with their tax filings (i.e. until YA 2020) and payments.

The letter also clarifies the following:

• Where a company’s “net profit / loss before tax” amount in its audited financial statement (FS) is denominated in a currency other than Ringgit Malaysia (RM), the exchange rate published by the Accountant General Department of Malaysia is to be used to compute the amount in RM for the purpose of completing Column A12 (i.e. net profit column) of the LE1 Form (i.e. Return of Profits by a Labuan entity under Section 5 and Subsection 2B(1A) of the LBATA).
• A Labuan entity which is dormant is still required to file a LE1 Form together with a formal notification letter and audited accounts or FS. Where the audited accounts or FS are not prepared, management accounts are also acceptable.
• The definition of a “dormant Labuan entity” – please see the Appendix to this tax alert for the definition provided in Appendix 1 of the IRB’s letter dated 11 March 2021.

APPENDIX

Definition of “dormant Labuan entity” per the IRB’s letter dated 11 March 2021

1. A Labuan entity is considered dormant if it:

a. Has never commenced operations since the date of its incorporation

b. Has previously been in operation or carried on business but has now ceased operations or business

c. Does not have any significant accounting transaction for one financial year before the occurrence of substantial change (i.e. 50% or more) in its equity shareholding. This means that there is no recording entry in the company’s accounts other than the minimum expense for compliance with stipulated statutory requirements. The minimum expenses referred to are as follows:

(i) Filing of the company’s annual return to the Companies Commission of Malaysia or Labuan Financial Services Authority

(ii) Secretarial fee for filing of company’s annual return

(iii) Tax filing fee

(iv) Audit fee, and

(v) Accounting fee

2. A Labuan entity is not considered dormant if it owns shares, real properties, fixed deposits and other similar investments including income such as rent, interest etc. (if any) received by virtue of the mentioned ownership.