# Advantages of Acquiring an Investment Bank License in Labuan, Malaysia and the Tokenization of Real World Assets and Securities > - Labuan, a federal territory of Malaysia, combines clear rules from Labuan FSA with a 3% corporate tax and no withholding or capital gains tax. > - A Labuan investment bank needs RM 10 million minimum paid-up capital and a real office on the island. > - It can do underwriting, trading, fund management, digital assets and tokenization, but no retail banking and no public deposits. By emin.de AI Desk. AI-written, human-supervised: not yet reviewed. Published 2024-08-02. Updated 2024-08-02. Canonical: https://emin.de/posts/advantages-of-acquiring-an-investment-bank-license-in-labuan-malaysia-and-the-to First published: https://medium.com/@em/advantages-of-acquiring-an-investment-bank-license-in-labuan-malaysia-and-the-tokenization-of-real-f4017f812904 (2024-08-02) Category: payments. Format: guide. Language: en. Provenance: ai_generated. AI-assisted: true. Reviewed by a human: false. ![](https://emin.de/media/advantages-of-acquiring-an-investment-bank-license-in-labuan-malaysia-and-the-to/01-2636d55b.png) ## Why Labuan Labuan is a good place to set up an investment bank. You get clear rules and good tax benefits in one place. It's part of Malaysia, it's known as business friendly and it has a strong financial services sector, so it works really well for international business and investment. Labuan is a federal territory of Malaysia off the coast of Borneo. It's one main island and six smaller ones. It sits right in the middle of Asia, so the big financial markets in the region are easy to reach. The island has built a name as a top international business and financial center, and the legal framework behind it is well regulated and transparent. The history goes back to the 19th century, when the Sultan of Brunei ceded Labuan to the British Crown. In World War II the island was a base for the Allied forces. In 1984 Labuan became a federal territory of Malaysia. Since then it turned into an international financial hub, mostly after the Labuan International Business and Financial Centre (Labuan IBFC) was set up in 1990. **Basically,** Islands off Borneo, Malaysian federal territory since 1984, right in the middle of Asian markets. ## What you get there So what do you get there? The tax is low. The corporate tax is 3% on audited net profits, or a flat MYR 20,000. And there is no withholding tax, no capital gains tax, no inheritance tax and no sales tax, which is very attractive for financial institutions. The Labuan Financial Services Authority (Labuan FSA) gives you a clear and transparent framework that supports you. It keeps you compliant and still lets the business grow. The location is in Asia, with good connections to the key financial markets, so you reach regional and global markets easily. The infrastructure is well developed. Modern telecommunications, banking and professional services are all there, so the business can run efficiently. And as part of Malaysia, Labuan gets the political stability and the solid economic policies of the country. **Basically,** 3% corporate tax or a flat MYR 20,000, no withholding, capital gains or inheritance tax. ## What it costs Now the costs. To start, the government fees for incorporating a company in Labuan are low compared to other places. They go from MYR 1,000 to MYR 6,000, depending on the type of entity. Legal and professional fees can vary, but usually they are between MYR 10,000 and MYR 20,000 for setting up the company, with legal, accounting and advisory services included. Then the running costs. An investment bank must keep a minimum paid-up capital of RM 10 million or its equivalent. Office space in Labuan is fairly cheap to rent. You also have to meet the substantial activity requirements, and that includes an operational office on the island. Salaries for skilled people in Labuan are competitive, and hiring local talent can save money. And you have ongoing costs for compliance, reporting and audits, which depend on how complex and how big the business is. So Labuan is a real opportunity for an investment bank, with strategic advantages and low costs. With the right guidance and support you can use what Labuan offers to reach your business goals. **Basically,** Incorporation fees run MYR 1,000 to 6,000, but the bank needs RM 10 million paid-up capital. ## What a Labuan investment bank can do So what can a Labuan investment bank actually do? In investment banking you can do underwriting and placement of securities, both equity and debt. You can do corporate advisory, like mergers and acquisitions, corporate restructuring and raising capital. And you can manage investment portfolios for clients. In trading and brokerage you can buy and sell securities for clients. You can also do market making and proprietary trading, so trading for your own profit. In fund management you can run collective investment schemes, like mutual funds and other collective investment vehicles. You can also offer private banking, so asset management made for high-net-worth individuals. In financial advisory you can do corporate finance advisory on investment products, strategies and securities, and give expert guidance on investment options. In treasury and risk management you can offer risk management services, including derivatives trading to manage financial risk. And treasury services like foreign exchange and money market instruments. **Basically,** Underwriting, M&A advisory, trading, fund management, private banking, treasury and derivatives. ## What it can't do And here is what a Labuan investment bank can't do. No retail banking. That means no savings or current accounts, no debit or credit cards and no personal loans or mortgages. No deposits from the general public. It can't take deposits from the public like a commercial bank does. No activities without the right license. Insurance underwriting or brokerage is not allowed without the insurance licenses. And there are limits on which clients you can work with. Usually the focus is on corporate and institutional clients and high-net-worth individuals, not retail clients. **Basically,** No savings accounts, no cards, no mortgages and no deposits from the general public. ## Compliance and tax For compliance, you have to follow the AML/KYC rules, so anti-money laundering and know-your-customer. You report regularly to the Labuan Financial Services Authority (LFSA) and stick to their transparency standards. You keep a minimum paid-up capital of RM10 million or more, depending on your risk profile. You need an operational office in Labuan. You set up strong internal controls for compliance, corporate governance and risk management. Your board members and senior management have to be competent and experienced. You appoint internal and external auditors for the yearly audits. You get approval from Labuan FSA before big changes to the business. And every year you submit audited financial statements to LFSA. On tax again, the corporate tax is 3%. There is no withholding tax on dividends, interest, royalties or service fees paid to non-residents. And you don't pay capital gains tax, inheritance tax or other indirect taxes like GST and sales tax. **Basically,** AML/KYC, regular reports to Labuan FSA, internal controls, and a real operational office. ## Digital assets and DeFi Then digital assets and DeFi. Buying digital assets, for example Bitcoin, is allowed under securities trading and investment management. DeFi investments are allowed if they fit the client's investment goals and risk profile. Staking is allowed as part of managing digital assets to get better returns. Collateralized loans are allowed as long as they follow the rules for credit facilities. You can also be a custodian for digital assets, with strong internal controls and following the AML/KYC rules. **Basically,** Buying Bitcoin, DeFi, staking, collateralized loans and custody are allowed under the rules. ## Tokenization of real world assets And then tokenization of real world assets and securities. Tokenizing real world assets is allowed under securities trading and issuing financial products. Tokenizing securities is allowed as part of dealing in securities and listing financial instruments on exchanges. For both you have to follow the Labuan FSA rules, the AML/KYC requirements and your internal controls. And for new financial products or services you may need approval from Labuan FSA first. So a Labuan investment bank can do a lot of investment banking, like trading, fund management, corporate advisory and managing digital assets. But it can't do retail banking and it can't take deposits from the general public. Following the Labuan FSA rules and the AML/KYC requirements is a must. For more details, check the [Labuan IBFC page](https://www.labuanibfc.com/sectors-offerings/banking/labuan-investment-banking). **Basically,** Tokenizing real world assets and securities is allowed, but new products may need FSA approval.