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Digital Company Formation

Labuan (Malaysia)

Tax Mitigation Jurisdictions

Synopsis:

Malaysia has an extensive double taxation treaty network wifh over 40 countries including virtually all major Asian and European jurisdictions. At present, despite the favourable fiscal regime in Labuan, it seems that most Asian countries have accepted that Labuan offshore companies (LOC's) are covered. In the case of European countries some, such as Switzerland and the Netherlands, have not accepted that LOC's should be covered. Nevertheless, indirect access can be gained by using a fully owned domestic company to receive appropriate dividends, royalties and/or interest. The weather is tropical with the main island benefiting from superb beaches and hotel facilities. The population is approximately 70,000.

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Location

Labuan is one of the two federal territories of Malaysia, Located close to Brunei and approximately 2 hours by plane from Kuala Lumpur. The territory consists of 7 small islands of which Labuan Island is the largest also with the advantage of been centrally located in the heart of the ASEAN community with the same time zone as Hong Kong, Singapore and Malaysia

Country Facts

Sovereign nation state located West of the United Kingdom. Declared independence from the UK in 1916 with full autonomy secured in 1922. Historically dependent on agriculture and suffered high emigration. However, over the last 20 or so years the country has developed Europe's most successful computer software sector, a very large pharmaceutical industry, a highly successful airline industry plus the more traditional brewing, agricultural and crystal industries. Per capita income is currently the 4th highest in the world ahead of the United Kingdom, France, Germany, the United States but behind countries such as Norway, Luxembourg and Switzerland. Population: 4,400,000 Size: 26,600 sq.miles

How to Incorporate a Labuan Company

All administration and management options are available in Labuan, however the exact choice will depend on whether a LOG is trading or non-trading. The Basic Mechanism includes:

  1. Incorporation of the company with LOFSA. the payment of all appropriate government duties and franchise taxes where authorised capital is below 50,000.00 Ringgit (approximately US$13,000.00).
  2. A Certificate of Incorporation with 5 copies of the Memorandum & Articles of Association, Statutory books, 10 Share Certificates, a company seal and your company nameplate displayed in Labuan.
  3. A registered office and a company secretary provided by the SCF licensed trust company.

 

Advantages of an Irish Resident Company

  1. No tax is imposed on the income of offshore companies in Labuan which are non-trading companies carrying on offshore non-trading activities such as the holding of shares, immovable property (i.e. a house or office), taking loans and/or placing deposits. Non-trading companies must maintain proper company books and accounts but do not need to have their accounts audited.
  2. Where companies are trading outside of Labuan they will be subject to a tax rate of 3% on their world-wide profits or a maximum annual payment of approximately US$6.000.00 depending on the fiscal election. The accounts of trading companies must not only be properly maintained but are also subject to an annual audit.
  3. Both trading and non-trading companies may benefit from Malaysia's 40 plus double taxation treaties either directly or by using domestic company conduits.
  4. There are no withholding taxes on dividends paid by Labuan offshore trading or non-trading companies.
  5. There are no inheritance, death or estate taxes.
  6. Foreign employee's of Labuan offshore companies can enjoy a series of personal tax concessions whilst resident in Labuan including up to a 50% discount on the custom and excise duty payable for personal vehicles.
  7. Confidentiality is guaranteed under the Offshore Companies Act 1990 and the disclosure of information is strictly prohibited unless pursuant to a court order.
  8. There are no minimum capital requirements unless a company is acting as a bank, insurance company or fund manager.
  9. The issue of shares and debentures to the public is allowed subject to the approval of LOFSA.
  10. There are no nationality restrictions for either directors or shareholders.
  11. Directors and shareholders can be corporate bodies.
  12. Shares can be denominated in any currency save the Malaysian Ringgit.
  13. Shares of different classes are allowed.
  14. Company AGM's may be held outside of Malaysia and, if required, by electronic method.
  15. Branches of foreign companies can be registered.
  16. Excellent banking facilities.
  17. Well educated professionals.
  18. English is the dominant language in commerce

Taxation

There are two types of offshore company under the Offshore Companies Act 1990 known respectively as an Offshore Company and a Foreign Offshore Company (effectively a branch of a foreign company). Both can enjoy the fiscal advantages described above, either being subject to a 3% tax on profits or full tax exemption depending on whether they are deemed trading or non-trading.

Relationship with the UK

The legal system is closely based upon that of the United Kingdom with English being almost universally spoken by the business community.

Annual Fees & Government Taxes

The classified Offshore Companies that are trading need to pay a tax rate of 3% on net profits (audited), or a minimum sum of RM 20,000. Offshore Companies that do not trade are required report non-trading accounts to be exempt on taxes for that particular fiscal year.