Embarking on offshore endeavors in Labuan offers entrepreneurs a unique array of benefits and strategic advantages. From its highly favorable tax rates, which can significantly reduce one's tax burden, to its streamlined registration processes, which make setting up one's venture a breeze, Labuan stands out as a beacon for non-resident founders seeking to establish their ventures in Malaysia's offshore jurisdiction.
Understanding Labuan's tax landscape and business environment is crucial for any non-resident entrepreneur. In this guide, we will delve into the company registration process for non-residents, discuss effective tax planning strategies for 2023-2024, and identify the industries that can benefit the most from zero or low tax rates.
With Labuan's robust infrastructure, entrepreneurial programs, and unwavering commitment to fostering innovation, the time is ripe to unlock your potential and set sail toward success in Labuan's offshore sector. Don't miss out on this timely opportunity.
Navigating Labuan's Tax Advantage: A Non-Resident's Guide to Company Registration
Explore the detailed plan for setting up your company as a non-resident in Labuan.
Labuan's offshore jurisdiction remains a popular option for expatriates looking for advantageous tax rates and residency certificates. These certificates, issued by the Malaysian Inland Revenue Department, protect individuals and businesses from double taxation and offer opportunities to reduce tax obligations.
It's important to note that Malaysia participates in the Automatic Exchange of Tax Information (AEOI) framework. Beginning in 2023, individuals and businesses looking to take advantage of Labuan's low tax rates need to show their economic and physical presence in Labuan and comply with the country's regulations and criteria.
Steps to Establishing a Business in Labuan as an Overseas Entrepreneur
Embarking on company registration in Labuan as a non-resident founder involves the following steps:
● Select a company name and secure approval from the registrar.
● Compile necessary corporate documentation, including articles of incorporation, memorandum, and beneficiary, director, and shareholder identity verification documents.
● Secure a physical office space and acquire a legal address for your Labuan-based company.
● Initiate the process of opening a bank account.
● Proceed with the company registration application in Malaysia.
● Fulfill the registration fee requirement for your Labuan entity.
Moreover, to comply with established economic substance mandates, engaging a resident as a company secretary and hiring office staff for your Labuan operations is essential. The required number of resident employees varies depending on the industry and business category.
Advantages of Establishing Your Offshore Company in Labuan
Discover the many advantages that await you when you establish an offshore company in Labuan.":
● Full ownership. You will fully own your offshore company without involving Malaysian partners.
● Favorable tax rates. Benefit from a low % corporate tax rate of 3% for trading foreign companies or 0% for holding and investment companies. Alternatively, opt for a competitive local corporate tax rate of 24%.
● Efficient registration. Register your offshore company in Labuan within a maximum of 7 days.
● Simplified business operations. If your industry is on the approved activity list, no special license is needed for international business in Labuan.
● Ready-made shelf companies. Purchase a pre-established shelf company legally in Labuan.
● Minimal capital requirement. Begin operations with a minimum paid-up capital of just USD 1 for your offshore company in Labuan.
● Global directors and shareholders. Directors and shareholders can come from any country without restrictions.
● Flexible capital requirements. There is no minimum required capital for the company.
● Tax exemptions. Enjoy tax exemptions on dividends, capital gains, inheritance, withholding taxes, and stamp duties.
● Renewable visas. Obtain renewable visas for up to 2 years in Labuan.
● Tax incentives. Subject to meeting specific criteria, your Labuan offshore company can benefit from tax incentives for global business activities.
Does that sound impressive? The
full list of benefits would take too long, but even those mentioned above make this jurisdiction worth your attention and consideration.
Tax Planning Strategies for Labuan in 2024
In the Labuan offshore jurisdiction, taxes must be paid in the fiscal year following the current financial period, with a deadline of March 31.
Labuan, Malaysia, has implemented changes to its tax system for foreign companies since January 1, 2019. The fixed tax of MYR 20,000 has been removed, and now different tax rates apply to various business sectors. Whether you are a resident or not, you can choose a niche that suits your business needs, enabling you to opt for a 0% or 3% profit tax rate.
Here are some of the business sectors in Labuan that benefit from zero or low tax rates:
1. Licensed financial service providers: Companies involved in leasing, fund management, and brokerage services are subject to a 3% profit tax rate if they meet specific criteria.
● Maintain a physical office in Labuan and employ at least two resident staff workers.
● Incur expenses amounting to at least MYR 100,000 in the incorporation jurisdiction.
● Maintain proper accounting records.
2. Professional service providers: Businesses that provide administration, consulting, management, and related services are eligible for the lowest profit tax rate of 3% in Labuan. They can also benefit from double taxation avoidance agreements, which are particularly advantageous for non-resident founders. However, to qualify for these benefits, they must meet the following criteria:
● Operate from a physical office in Labuan with at least two resident staff workers.
● Conduct verified expense transactions in Labuan.
● Declare profits and maintain proper accounting records.
3. Holding companies: Entities that invest in other companies or assets can benefit from a 0% profit tax rate if they meet the criteria for being pure equity holding companies or non-private Labuan investment holdings that meet economic substance requirements. Additionally, holding companies may be required to set up a central management office in Labuan to fulfill eligibility criteria.
Note: Failure to meet any specified criteria will subject the company to the local profit tax rate of 24%.
Summing Up Labuan Offshore Jurisdiction in Malaysia
In 2024, Labuan emerges as a compelling option for offshore businesses, offering many advantages. Here's a quick overview:
1. Low corporate tax rates make Labuan attractive for businesses seeking fiscal advantages.
2. Simplified company registration procedures in Malaysia make establishing businesses easier and faster for entrepreneurs.
3. Forex license applications offer opportunities for online currency trading businesses.
4. Fintech support enables entrepreneurs to utilize technology for business innovation and growth.
5. Programs for entrepreneurs designed for aspiring entrepreneurs, providing valuable opportunities to learn, network, and collaborate with other business owners.
With its blend of favorable tax policies, supportive infrastructure, and entrepreneurial programs, Labuan stands out as a promising destination for offshore businesses seeking growth and prosperity in the dynamic business landscape 2024 and beyond.
