Labuan is a Malaysian island that has been transformed into a tax haven by the Malaysian authorities. It is nothing but a tax haven that has its own laws and jurisdiction. The Labuan Offshore Financial Centre (OFC) was founded by the government of Malaysia in 1984 to enable foreign investors to establish and operate offshore companies in a tax-free environment. Though it is a tax-free haven, Labuan does charge tax on several other things like income, property and services in addition to the 5% profit tax. As labuan is recognized by Malaysia as a tax haven, hence it is committed to uphold the highest standards of transparency and integrity. Therefore, investors are required to file a tax return in Malaysia. This enables both Malaysia and Labuan to track the transactions effectively and to collect taxes if required.