An offshore company is a company which doesn’t conduct business in its country of incorporation. As a result, the company is free from many regulations and taxes which are imposed on local businesses.
Labuan Malaysia has emerged as a reputable location for offshore financial centers in Asia. It has been attracting multinational businesses from around the world. Insurance, banking, and commodities traders are among those flocking to this low-tax locale.
Benefits
If the operation meets certain requirements, tax savings can be substantial.
The current tax rate for trading activities such as banking, trading, and shipping operations is 3%. There is a 0% tax on non-trading activities like holding securities, stocks, shares, loans, deposits, or properties located in Labuan.
Although taxes are low, annual tax filing is required.
Labuan understands the need for personal and corporate confidentiality. The registrar will not disclose information such as shareholders, directors, or beneficiaries without your specific permission.
The minimum number of shares for an offshore company is one. The shareholder can be an individual, a corporation, or a trust company holding the shares as a nominee. The sole shareholder can be a foreigner living overseas.
If you incorporate a company in Labuan, you are entitled to a Labuan Employment Pass, which allows travel to Malaysia.
Requirements
All Labuan companies must conduct an annual audit and maintain proper account records. Accounting and bookkeeping services need to keep their records open for inspection at all times.
A Labuan corporation must meet a prescribed number of employees and annual operating expenditures based on the type of business. Using an accounting service for payroll helps keep things streamlined.
A minimum of one share must be issued. There has to be at least one shareholder, who can be a foreigner living overseas. There has to be a director and company secretary both of whom must be residents of Labuan.
Types of Companies
Labuan has become a tax-friendly haven for financial services companies in Southeast Asia. Three types of companies are ideal to benefit from incorporation in Labuan.
Pure equity holding companies. These are businesses whose sole income is from share ownership of other companies.
Investment companies that earn income through investments in securities, stock, shares, loans, deposits, or properties situated in the jurisdiction.
Service companies are the third category of companies that can benefit.
- Administrative services
- Accounting
- Backroom processing
- Payroll services
- Agency services
- Talent management
- Bankruptcy and insolvency services
- Financial services
This is not an exhaustive list but serves as a guide to those types of companies suited for Labuan incorporation.
Those interested in finding out more can check out Labuan incorporation and registration procedures.
Drawbacks
The high degree of privacy and confidentiality can make it difficult for potential investors or business partners to run a background check on your business. You can always provide audited financial documents to prospective investors, but they will have a difficult time conducting due diligence.
You could potentially miss out on specific rebates or deductions from your home country. These should easily be offset by the tax advantages of incorporating In Labuan.
