Advantages of Labuan Offshore Company in Malaysia
Labuan has become one of the most representative business destinations in Asian region for the past years. Located in one of the peaceful parts of Malaysia, Borneo, it also comprised of several other islands. Some may debunk stating that there are other several offshore Company jurisdictions in Asia, but none are comparable to Labuan’s Company setup when it comes to advantages the business owner are offered.
Ranked as the 12th easiest and friendliest place to do business, Malaysia turns out to be a lucrative business investment option. Comparing to other countries who offers offshore incorporation such as Hong Kong and the Marshall Islands, Labuan has become reputable amongst the few offshore financial hub in Asia, automatically attracts investors all around the world.
What benefits does incorporate a Labuan Offshore Company compared to a Private Limited Company (Sdn. Bhd.)? Here are some of the reasons:
1. No local partners required
Similar to a Private Limited Company (Sdn. Bhd.) under Company Act 2016, a Labuan offshore Company also does not need a local nominee director in order for the Company to be incorporated.
The aim was to attract foreign investors to invest within the Malaysia market, hence the government has eased the registration requirement and make it an entirely foreign owned with a minimum presence of one director and one shareholder.
2. Low-cost Company setup
The Labuan offshore Company setup cost is considered reasonable compared to other offshore jurisdictions. This automatically encourages the foreign investors to kickstart their business here with ease. The cost to setup a Labuan offshore Company is:
Application for Company name reservation – MYR 50 (equivalent to USD$ 15)
Paid-up share capital – Depends on how much the initial paid up capital is. If it is below than MYR 50,000 then the cost is MYR 1,000 (equivalent to USD$ 300). The higher the paid-up capital is, the more expensive the cost incur
Registration of the Company – MYR 6,000 (equivalent to USD$ 2,000)
Annual recurring fees – For a foreign Labuan Company, it typically costs around MYR 5,300 (equivalent to USD$ 1,500)
3. Low corporate tax
It is common knowledge that the corporate tax for Private Limited Company (Sdn. Bhd.) is between 17% to 24%. However, for a Labuan offshore Company, the tax is much lower which is at 3%. This tax rate is able to assist business entrepreneurs to get help over the high corporate tax instalment.
There are also several tax advantages offered especially for Labuan Offshore Company which are:
Global tax market – The lower scale tax brackets meant to minimise the net levy liability on local incorporations
Business tax deferral – Offshore Company impose income tax solely on Companies that are both locally traded as well as domicile. It is an ideal hub for investors to position a portion of their pools of revenue
Tax Off-Setting incentives – Offshore Company also provide more shielding and exemption from stamp duties and excise on transactions.
A summary of description of Labuan offshore Company business activities and its tax treatment is shown below:
|DESCRIPTION OF LABUAN ACTIVITIES
|Labuan non-trading activity
Holding of investments in securities, stock, shares, loans, deposits or any other properties situated in Labuan by a Labuan company
|Not subject to tax
|Labuan trading activity
Includes banking, insurance, trading, management, shipping operations, licensing or any other activity which is not a Labuan non-trading activity
|3% of net profits per audited accounts
|Carrying out both Labuan trading and non-trading activities
– Deemed to be Labuan trading activity
|Same tax treatment as Labuan trading activity (3% of net profits per audited accounts)
|Non-Labuan business activities or where an irrevocable election is made to be taxed under the MITA 1967
||Taxed pursuant to the MITA 1967 at the prevailing income tax rate of 24%
Despite being an offshore Company, Labuan is still liable to comply with the rules and regulations enacted by the Central Bank of Malaysia (Bank Negara), the Labuan company formation authority, Malaysia’s immigration, and Inland Revenue Authority laws.
In lieu to adhering with the anti-money laundering (AML) and counter terrorism financing legislation, all licensed service providers such as Company Secretary and Auditors specifically for Labuan Companies are expected to enhance their Know-Your-Client (KYC) procedure before closing any business deals.