Malaysia (Labuan) or Hong Kong: where should your business be based?
Hong Kong ranks higher in the index, 02 against =03. Which suits you depends on where the owners live, what the company is for and how it will be run.
Pillar by pillar
Doing business, side by side
Tax
Labuan trading activity is taxed at 3% of chargeable profits, and qualifying non-trading (holding) activity at 0%. Failing the substance tests means 24% for that year. Labuan entities located in Labuan are outside sales and service tax.
The first HK$2 million of profit is taxed at 8.25%, and tax is charged on a territorial source basis. There is no sales tax or VAT.
Set-up
Labuan FSA approves incorporation within 24 hours of complete documents, fee payment and due diligence clearance. The fee is USD 300 to USD 1,500 by paid-up capital, and the annual fee is USD 1,000 from 2026.
Electronic incorporation costs HK$1,545, against a one-hour target met in 90% of cases. Business registration costs HK$2,350 and the annual return HK$105.
On the ground
A licensed Labuan trust company must incorporate the company, and it needs a resident secretary and a registered office in Labuan. To keep the 3% rate it needs fit and proper full-time staff working in Labuan and minimum annual spending there.
The company secretary must be resident in Hong Kong, and the company must keep a registered office there. There is no minimum capital.
Ownership
Beneficial ownership information is not on a public register. It is held through the Labuan trust company and is available to Labuan FSA and other authorities.
The significant controllers register is kept by the company, not filed with the Registry, and must be produced to law enforcement on demand.
Residence
A Labuan company can sponsor an employment pass for a director or employee paid at least RM10,000 a month, and all pass holders can bring dependants. MM2H is the alternative, from a USD 150,000 deposit and a home worth RM600,000.
The Investment as Entrepreneurs route is discretionary with no fixed minimum. The New Capital Investment Entrant Scheme requires HK$30 million.
Living and working
Currency
Malaysian ringgit (MYR). Labuan entities are not subject to Malaysian exchange control and can trade in any currency.
Hong Kong dollar.
Time zone
UTC+8 all year, with no daylight saving.
UTC+8.
Personal tax
Residents pay progressive rates up to 30% on taxable income above RM2 million, and non-residents pay a flat 30%. Dividends above RM100,000 a year are taxed at 2% from 2025.
Salaries tax has a progressive top rate of 17%, or a standard rate of 15% to 16%; estate duty was abolished from 11 February 2006.
Flights
Kuala Lumpur International Airport serves 143 destinations with 71 airlines, according to Malaysia Airports in 2026. Labuan has its own airport with domestic flights to Kuala Lumpur.
About 140 airlines serve more than 220 destinations; Singapore is about 4 hrs away and London Heathrow about 12 hrs 45 mins.
Language
Chinese is official, and English can also be used as an official language by the executive, the legislature and the judiciary.
Malaysia (Labuan) vs Hong Kong: common questions
Malaysia (Labuan): Labuan trading activity is taxed at 3% of chargeable profits, and qualifying non-trading (holding) activity at 0%. Failing the substance tests means 24% for that year. Labuan entities located in Labuan are outside sales and service tax. Hong Kong: The first HK$2 million of profit is taxed at 8.25%, and tax is charged on a territorial source basis. There is no sales tax or VAT.
Malaysia (Labuan): Labuan FSA approves incorporation within 24 hours of complete documents, fee payment and due diligence clearance. The fee is USD 300 to USD 1,500 by paid-up capital, and the annual fee is USD 1,000 from 2026. Hong Kong: Electronic incorporation costs HK$1,545, against a one-hour target met in 90% of cases. Business registration costs HK$2,350 and the annual return HK$105.
Malaysia (Labuan): A licensed Labuan trust company must incorporate the company, and it needs a resident secretary and a registered office in Labuan. To keep the 3% rate it needs fit and proper full-time staff working in Labuan and minimum annual spending there. Hong Kong: The company secretary must be resident in Hong Kong, and the company must keep a registered office there. There is no minimum capital.
Malaysia (Labuan): Beneficial ownership information is not on a public register. It is held through the Labuan trust company and is available to Labuan FSA and other authorities. Hong Kong: The significant controllers register is kept by the company, not filed with the Registry, and must be produced to law enforcement on demand.
Malaysia (Labuan): A Labuan company can sponsor an employment pass for a director or employee paid at least RM10,000 a month, and all pass holders can bring dependants. MM2H is the alternative, from a USD 150,000 deposit and a home worth RM600,000. Hong Kong: The Investment as Entrepreneurs route is discretionary with no fixed minimum. The New Capital Investment Entrant Scheme requires HK$30 million.
Read more
Still weighing Malaysia (Labuan) against Hong Kong?
A short call settles what a ranking cannot: your residence, your structure and your timeline.