Not all Labuan companies have the same audit obligations. The requirement depends on the type of activity carried out.
Generally, the following must undergo a Labuan audit:

1️⃣ Trading Labuan Companies

• Companies carrying out trading activities (e.g., trading, management services, consultancy, investment holding with active income).
• Audit is mandatory
• Required for tax election (3% tax on audited net profits)

2️⃣ Licensed Labuan Entities

Entities licensed under Labuan FSA such as:

• Labuan banks
• Insurance companies
• Fund managers
• Leasing companies

These entities must appoint a Labuan approved auditor annually.

3️⃣ Certain Investment Holding Companies
Even if non-trading, some structures may still require audited financial statements depending on substance and tax election.

A Labuan approved auditor must:

• Be approved by Labuan Financial Services Authority
• Hold valid professional certification (e.g., member of MIA)
• Be licensed to practice in Labuan

It is important to note:

• Not every Malaysian audit firm can conduct a Labuan audit.
• The auditor must be specifically approved to act in Labuan.

When selecting an audit firm in Labuan, ensure:

• They are officially registered with Labuan FSA
• They have experience with offshore structures
• They understand Labuan tax regime and compliance requirements

Certain Labuan companies may qualify for exemption from audit requirements.

Common exemption scenarios:
1️⃣ Dormant companies
2️⃣ Non-trading investment holding companies (subject to conditions)
3️⃣ Companies that opt for RM20,000 flat tax (subject to latest Labuan tax rules)

However:

• Exemption does not automatically mean no accounting records are required.
• Proper bookkeeping must still be maintained.
• Tax filing obligations still apply.

⚠ Always verify current exemption status with a Labuan approved auditor before assuming exemption.

Many Labuan companies face compliance issues due to misunderstandings.

❌ Assuming all Labuan companies are automatically exempt
Audit requirement depends on business activity.

❌ Appointing a non-approved auditor
Only a Labuan approved auditor can sign off statutory audit reports.

❌ Late appointment of auditor
Auditor should be appointed early to avoid filing delays.

❌ Poor bookkeeping throughout the year
This increases audit cost and delays finalisation.

❌ Confusing Malaysian Sdn Bhd audit rules with Labuan audit rules
Labuan operates under separate legislation and regulatory framework.

Appointing an audit firm in Labuan involves the following steps:
Step 1: Confirm Audit Requirement
Determine whether your company falls under mandatory audit category.

Step 2: Select a Labuan Approved Auditor
Engage an audit firm officially approved by Labuan FSA.

Step 3: Board Resolution
Pass a director’s resolution appointing the auditor.

Step 4: Engagement Letter
Sign formal audit engagement agreement.

Step 5: Prepare Financial Documents
Provide:
→ General ledger
→ Bank statements
→ Contracts & invoices
→ Trial balance
→ Supporting schedules
→ Early preparation reduces audit fees and ensures smoother compliance.

Understanding Labuan audit requirements is critical for avoiding penalties and maintaining regulatory compliance.
Whether you are:

• A trading Labuan company
• A licensed Labuan entity
• An investment holding company

You must assess:

• Whether audit is required
• Whether you have appointed a valid Labuan approved auditor
• Whether your financial records are properly maintained

Proper planning ensures smoother tax filing, regulatory compliance, and peace of mind.