New guideline clarifies requirement of “fit and proper full-time employees” for Labuan entities

6 November 2025 | Accounting and reporting | Income tax

A new guideline has been released to clarify the criteria of fit and proper full-time employees of Labuan entities to comply the substance requirements under the Labuan Business Activity Tax Act 1990 and the subsidiary legislations.

The criteria of a full-time employee:

• met the fit and proper criteria
• employed on a permanent or contractual basis by the Labuan entity, and
• performed their work physically for the Labuan entity in Labuan.

The fit and proper criteria is deemed to be met when:

• the employees performed work are relevant to the entities’ Labuan business activities
• the employees possessed sufficient and appropriate competencies and capabilities to perform their duties, and
• the employees do not have conflict of interest in performing their duties with the Labuan entities.

A fit and proper full-time employee employed by the Labuan entity is required have a contract of service with the entity. Other method of employment such as outsourcing does not qualify under the criteria of fit and proper full-time employees.

Source: Technical Guidelines, Substance requirements for fit and proper full-time employee of Labuan entities, IRBM website, 5 November 2025, accessed 6 November 2025.