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We frequently hear from potential clients looking to start foreign exchange trading businesses all over the world. One of Healy Consultants Group PLC’ favourite jurisdictions for currency exchange businesses is Labuan, a low-tax international business and finance centre in Malaysia. Foreign exchange businesses are subject to regulation everywhere, and this post summarizes the regulatory framework and licensing scheme that applies in Labuan.

How are foreign exchange businesses regulated in Labuan?

The license for forex companies is known as a “money broking license” in Labuan, which allows the company to act as an intermediary between buyers and sellers in currency markets. The license is issued by the Financial Services Authority arm of the Labuan IBFC, which regulates all businesses in the jurisdiction. Although the brokerage aspect of the business is regulated, buying and selling currencies on the company’s own account does not require a license.

What are the financial requirements to set up a Labuan forex company?

Money broking businesses in Labuan require a minimum share capital of 300,000 Malaysian Ringgit. The capital does not have to be expressed in Ringgits and can instead be the equivalent value in another currency. At the time of writing, RM300,000 is the equivalent of ~US$81,000, £55,000 and €76,300.

Whatever the currency chosen, the company’s reserves must always be at or above this level; the share capital cannot therefore be used to cover operational expenses.

What operational conditions must I fulfil to get a money broking license in Labuan?

All foreign exchange companies registered in Labuan must have physical premises in the IBFC. All of the company’s currency dealings must take place through the firm’s Labuan office, meaning that it is not suitable as an offshore choice for entrepreneurs resident in other jurisdictions.

Money brokers in Labuan are also prohibited from dealing with Malaysian residents or from trading Ringgit. However, Ringgit may be held and spent for the purpose of paying business expenses such as rent, staff costs, etc.

How much does it cost to set up a foreign exchange company in Labuan?

The government charges US$350 to assess license applications for aspiring money brokers, plus an annual license fee of US$1,500. Prior to those steps, there is a US$400 government fee to register a company in Labuan. Taxes are low, at only 3% of audited profits or MYR20,000 (the company may elect which rate to pay).

How do I incorporate a company in Labuan?

Labuan companies require only one shareholder and one director, and the incorporation process must be completed by a licensed management company in Labuan. Healy Consultants Group PLC assists our clients with Labuan business registration and can also guide you through the process of becoming licensed as a money broker.

If you are interested in establishing a foreign exchange company or any other form of business in Labuan, contact us or visit our website for more information.