Labuan may appear as a favourable option for incorporating an offshore company. The jurisdiction is a Federal Territory of Malaysia. So, it combines all benefits of this state and introduces new ones, especially in financial sectors. Among such benefits are favourable tax conditions, well-developed infrastructure and the overall ease of establishing an offshore company.
Forms of Legal and Business Presence
If you want to enter Labuan, your business and legal presence may be established in one of these offshore forms:
- Private Company Limited by Shares – a vehicle where the liability of shareholders is limited to the value of contributions made. In this case, shares cannot be transferred freely to the public. The demand for minimum statutory capital is absent.
- Private Unlimited Company – as its title suggests, the shareholders bear the entire liability for the results of the company operation.
- Public Company Limited by Shares – a vehicle where shares can be publicly-offered. This is a more advanced form of doing business that is designated for involving extra financing, entering stock markets. The amount of the statutory capital is determined here on a case-by-case basis.
- Company Limited by Guarantee – this vehicle envisages the limited liability of its shareholders that is restricted to the amount of the contributions made and the certain extra amounts the shareholders are ready to cover. This vehicle is used mostly for conducting non-profitable activities.
- Limited Partnership – it may be established by at least two founders: (i) one of them should bear the unlimited liability for the results of all partnership’s operations and (ii) at least one partner that bears the unlimited liability for the results of the partnership’s operation.
- Limited Liability Partnership – a partnership may be established by at least two business partners whose liability is limited to the amounts of contributions made.
- Branch – a foreign entity may establish its branch in Labuan to conduct certain types of commercial activities.
- Representative Office – this formation is designated to explore commercial opportunities in Labuan and promote a foreign corporate entity.
Registration Requirements and Steps
Setting up a company in Labuan requires passing these preliminary steps:
- Defining commercial objectives to fulfil.
- Verifying a business name for a future vehicle.
- Collecting data about the founders, beneficiary owners and management of the commercial vehicle.
- Arranging the registered office for the future vehicle.
- Preparing the statutory documents for a vehicle.
- Lodging the package of documents to the Labuan Business and Financial Center for the state registration.
- Registering for tax and social security purposes.
- Opening a bank account for the newly-founded vehicle.
- Obtaining required permits and licences (necessary for certain types of commercial activities).
Legal and Regulatory Framework
Incorporating an entity in Labuan is more than simple and straightforward. The procedure may last around a couple of weeks only. The local environment is very favourable for abroad investments.
Principal legislative acts regulating establishing and operation of a local corporate entity are the Labuan Companies Act and the Labuan Business Activity Tax Act. The requirements of the Labuan Financial Services and Securities Act should be also foreseen in certain cases.
The principal state authorities in the case of starting and running a business in Labuan are the Labuan Financial Services Authority, the Central Bank of Malaysia, the Inland Revenue Board.
Advantages of the Jurisdiction
Establishing a company in Labuan may be promising in view of these basic advantages the jurisdiction has:
- Offshore vehicles can conduct certain activities without any permits (e-commerce, trading, consultancy services, export and import operations)
- Free-port regime
- Plenty of incentives, including tax
- Zero currency control
- High level of confidentiality with minimum disclosure requirements
- Good measures for the property protection
Tax System of Labuan
If you think about company formation in Labuan, the next tax highlights the jurisdiction may be helpful:
- Corporate income tax (CIT) rate – 3 %
- Personal income tax rate – progressive rates may vary depending on the income of the residents. But the tax is not applicable to non-residents.
- VAT – 0 %
- Withholding tax rates – not applicable
- Capital gains tax rates – 0%
How Prifinance Specialists May Assist You
If you consider an option of setting up a company in Labuan, Prifinance specialists will consult more precisely about all potential benefits you may enjoy here. We are also ready to assist you with drafting all respective documents, conducting the formal registration procedure and supporting the operation of a future vehicle further. Reach us for more precise discussions and solutions for your concrete case.