Crypto License in Labuan

Favorable tax system.
This jurisdiction has a favorable tax rate on profits – 3% (or a fixed amount of $5000), no VAT, no sales tax, no capital gains tax and royalties, dividends, and no stamp duty.

Fast business registration.
The authorities are interested in the development of innovative businesses, so business registration takes 6 days. It is possible to register for a limited liability company, limited partnership, and unlimited liability company.

Malaysian market.
Labuan has a favorable geographical location between Southeast and East Asia, surrounded by countries where the crypto industry is actively developing (Hong Kong, Singapore – more than 200 fintech companies, Indonesia), and signed several cooperation agreements.

They developed the financial industry.
There are representative offices of the giants of the banking system and exchange trading, there is an opportunity to work with different currencies and payment cards. The financial market regulator LFSA is a member of the FATF group and requires market participants to comply with anti-fraud standards. Obtaining a Labuan crypto license requires compliance with AML procedures. This symbolizes that the interests of investors are protected by international regulations, and this increases credibility among market participants

Successfully applying for a Cryptocurrency Exchange License in Labuan is preceded by data collection and regulatory compliance work from the Regulator:

Company Registration.
This region provides an opportunity for non-residents to own 100% of the company. The name of the company must be in Latin letters and have the following designations at the end: Ltd., Corp., Incorp. etc. It is required to have a local office (lease or purchase).

Authorized capital.
To conduct business in this zone, the Regulator has set a minimum amount for the initial capital – from $110,000.

Data Protection.
The LFSA requests organizations to report cyberattacks, unauthorized hacks, and their consequences within 14 days. Every client transaction must be recorded.

Organizational Structure Requirements.
There must be at least one shareholder without residency requirements (a legal entity is allowed to be a shareholder), and managers must be two (only physical persons without residency restrictions). All identification details are provided to the Regulator and the experience of the general managers is confirmed. The LFSA will approve any changes in directors or shareholders that take place. In addition, an external auditor is appointed to review the annual financial statements.

Compliance with AML principles.
Compliance with FATF rules is mandatory for financial organizations. An AML specialist should be appointed in the company, to monitor compliance with the provisions of the Anti-Money Laundering and Countering the Financing of Terrorism Act and the Guidelines of the Central Bank of Malaysia.

License Fee.
Issuance of a crypto license takes place after payment of the state fee – $1500.

When issuing an official permit, the Regulator analyzes a list of materials:

• The business plan of the organization, which describes the forecast of activity for 3 years
• AML/KYC procedures and enforcement measures
• Information on managing managers and shareholders (passport data, place of residence, and proof of work experience of at least 2 years)
• Company documents (certificates, articles of association, contracts, minutes)
  Documents confirming that the company has a local office (lease, purchase).
• Preparation and collection of documents, and account opening may take up
  to 2 months.
• Application for a cryptology license to the LFSA takes up to 7 days, and evaluation of data submitted to the Regulator takes up to 6 months. The LFSA then sets a deadline for completing the requirements for a full license.

The LFSA has the right to request additional documents.

The main regulator and overseer of the financial market is the Labuan Financial Services Authority (LFSA), which monitors compliance based on legislation such as:

• Financial Services Act of 2013.
• The Anti-Money Laundering and Countering the Financing of Terrorism Act and Guidelines from the Central Bank of Malaysia.
• Labuan Business Tax Act 1990
• Malaysia Income Tax Act 1967
• Labuan Companies Act 1990
• Labuan Business Requirements of 2019

For fintech companies, Labuan is a real tax paradise:

Annual fee of $1500.
No tax on gains, dividends, inheritance, stamp duty, royalties, or interest tax.

But, among the mandatory requirements for cryptocurrency companies is to undergo an independent audit, the LFSA must approve a specialist auditor. Every year, cryptocurrencies submit audited financial statements to the LFSA along with balance sheets, income statements, cash flow statements, and notes on financial activities.