The Labuan Business Activity Tax (Requirements for Labuan Business Activity) (Amendment) Regulations 2025¹ (“Amendment Regulations”) were gazetted on 9 September 2025.
 
The Amendment Regulations amend the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021² (“Principal Regulations”) as follows:

1.	Amendment of Regulation 2
	Regulation 2 of the Principal Regulations is amended by substituting the words “full time employees” with the words “fit and proper full time employees”.

2.

New Regulation 2A

A new regulation 2A is inserted into the Principal Regulations to prescribe the requirements for a “fit and proper” full time employee. A Labuan entity carrying on a Labuan business activity must ensure that such employee shall: carry out work that is appropriate in respect of the Labuan business activities of the Labuan entity; have adequate and appropriate competency and ability in respect of the Labuan business activities of the Labuan entity; not have personal interests or other responsibilities that may interfere with the performance of his duties in respect of the Labuan business activities of the Labuan entity; be employed on a permanent or contractual basis by the Labuan entity; and carry out his work physically in Labuan.

3.	Amendment of the First and Second Schedules
	The headings of column (3) of the First and Second Schedules of the Principal Regulations are amended by replacing the words “Minimum number of full time employees in Labuan” with “Minimum number of fit and proper full time employees in Labuan”.

 
Comments
 
The Amendment Regulations introduce a new requirement that the full time employees of a Labuan entity must be “fit and proper” as provided in the new Regulation 2A. The amendments elevate the compliance standard for Labuan entities by prescribing clear conditions relating to the suitability, competency, and presence of employees engaged in Labuan business activities.
 
Labuan entities should review their staffing arrangements to ensure compliance with the new “fit and proper” criteria, particularly the requirements relating to competency and the physical presence of employees in Labuan.
 
 
Alert by Victoria Low (Associate) of the Tax Practice of Skrine.
 
 

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