Failure to comply with the Labuan regulations and guidelines set out by the Labuan Financial Services Authority (Labuan FSA) can result in various penalties and consequences. These include:
Financial penalties: Companies that fail to comply with the economic substance requirements may be subject to fines and penalties.
Loss of tax benefits: Companies that fail to meet the economic substance requirements will not be eligible for the reduced corporate tax rate of 3% and will be subject to the standard tax rate of 24% on their net income.
Reputation damage: Non-compliance with regulations can damage a company’s reputation and may make it more difficult for them to conduct business in the future.
Revocation of licenses: The Labuan FSA has the authority to revoke the licenses of companies that fail to comply with the regulations, which can lead to the company being unable to operate in Labuan.
Criminal penalties: In severe cases of non-compliance, the company and its directors may be subject to criminal prosecution, which can result in fines and imprisonment.
It is important to note that companies that fail to comply with the Labuan regulations may also be subject to additional penalties and consequences set out by other relevant authorities in Malaysia.
In summary, failure to comply with the Labuan regulations and guidelines set out by the Labuan FSA can result in financial penalties, loss of tax benefits, reputation damage, revocation of licenses, and even criminal penalties. It is important for companies to be aware of the regulations and to take steps to ensure compliance.