INTERSHORES i 6 Things To Know About A Labuan Holding Company

With a low attractive text regime, Labuan is one of the few offshore financial centers in Asia. It is politically stable and economically strong. Hence, attracting many foreign investors to set up a company in Labuan. If you are deciding whether to start a company in Labuan, it is important to understand the advantages of doing so. 


Attractive tax regime

The low tax in Labuan allows Labuan to remain attractive for foreign investors to start a business. The corporate tax rate is 3% on annual net profits. This is relatively lower than the Worldwide Average Statutory Corporate Income Tax Rate of approximately 24%. There are zero taxes for non-trading offshore companies. In addition, there is no sales tax, value-added tax (VAT), custom duties and stamp duties. There are no withholding taxes on dividends, royalties and interest payments. 


The directors of the company who are non-residents of Labuan are not required to pay personal income tax in directors' fees as well. 


The presence of the double tax avoidance treaties with 70 countries including Singapore, India, China, the United States and Canada enables the companies to be able to avoid taxes in their residential country. Without the presence of the double tax avoidance treaties, through the remittance and distribution of assets and income, you may be subjected to taxation. Hence, this would defeat the purpose of setting up your company in a low tax regime.


Easier compliance

In Labuan, licenses are not required for trading, e-commerce, import, export and consulting business. Hence,can save costs associated with these special permits and licenses. 


For companies operating solely for investment holding purposes, there is no tax nor audit reports. Generally, there is less tax filing obligation in Labuan. 


Privacy and anonymity

The laws in Labuan offer privacy and anonymity of the members of the company, which is a huge advantage attracting foreign investors. The directors and shareholders are not obliged to disclose their identity if they are unwilling to do so. 


In addition, business owners have the authority not to disclose information such as profits, losses, and major financial transactions. The respect given to individuals and corporations in terms of privacy laws attracts global investments. With the option of not disclosing their information, individuals are able to separate themselves from the corporation. The enhanced confidentiality acts as protection to individual assets and financial security. 


Ease of company formation and lower cost

The registration of an offshore company in Labuan is relatively simple and fast. The most popular type of company  is the International Business Company (IBC). It requires a low capital and shareholding requirement. There is one director and one shareholder and they do not need to be a resident of Malaysia. In addition, minimum paid-up capital, public disclosure of directors, shareholders, charges, loans or agreements are all not required. However, a local registered address is required. 


Furthermore, the registration requires minimal documents.  The incorporation costs and the operating expenses are relatively affordable. Operation costs are low due to affordable labor.   This translates to lower costs for both establishing and maintaining an offshore company. Hence, starting a business in Labuan is more viable due to its ease and affordability. 


Emerging Asian Fintech Centre

As an emerging Fintech Centre, businesses can capitalize on the increasing demand for payments and currencies, financial software, platforms and data analytics in Labuan. In addition, the government is working towards creating a business-friendly environment and streamlined licensing procedures.  If you are looking at starting a Fintech business, Labuan would be an ideal place. 


Free port regime

Situated on the major shipping and air routes of the Asian Region, Labuan allows for access to the Asia market. It is also an applicable free port regime with no special tariffs imposed on companies carrying out import and exports activities. 


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Whilst reasonable care has been taken in provision of information above, it does not constitute legal or other professional advice. INTERSHORES does not accept any responsibility, legal or otherwise, for any error omission and accepts no responsibility for any financial or other loss or damage that may result from its use.  In particular, readers are advised to take appropriate professional advice before committing themselves to any involvement in jurisdictions, vehicles or practice.









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