Labuan Offshore Company
The Labuan Offshore Company is authorized under the Labuan Offshore Companies Act 1990 (OCA). This offshore company is a company that is either limited by shares or limited by guarantee. The tax regime imposed on Labuan offshore corporation offers either full exemption on taxes or a reduced tax regime. The tax regime imposed on Labuan offshore companies depends on the nature of business activities carried out by the offshore company in Labuan. Offshore companies involved in non-trading activities (i.e. investment and holding companies) are fully exempt, while offshore trading activities is subject to a 3% tax on profits.
Under the Labuan Offshore Companies Act, all Labuan offshore companies must use a Labuan Trust Company to provide the necessary and mandatory administrative functions of the company. The trust company will provide the required registered address, the Resident secretary, a resident director (a trust officer) Labuan offshore company may be formed by both residents and non-residents of Malaysia, and nationality and resident status is not a factor. The requirements for incorporation of a Labuan offshore company are simplified requiring at least one director and Resident Secretary who must be a Trust Officer of a trust company. The position of director and secretary can be held by corporate entities. A minimum of one shareholder is required. There is no minimum capital requirement on Labuan offshore companies, but the offshore corporation may issue shares of different classes and of different rights including registered, preference, redeemable shares. Bearer shares are not permitted for Labuan offshore companies. The accepted issued share capital is one share, fully or partly paid up.
The Beneficial ownership of Labuan offshore companies is not disclosed to authorities. Offshore companies in Labuan have to file annual returns and maintain a set of accounting records in Labuan. As previously noted, all offshore corporations, similar to Belize corporation, in Labuan must have a registered office in Labuan, and this service is provided by a Labuan Trust company, specifically set up to provide these services for offshore companies in Labuan.
Labuan offshore companies may conduct any legitimate business in, from and through Labuan, except for specific business such as banking and insurance which require special licensing.
Labuan Offshore Corporations are not allowed to engage in business with Malaysia residents nor may they do business in the formal Malaysian currency, except where it local administrative requirements are met. Offshore companies are permitted to conduct specific activities with local residents including:
- The contracting professional business services
- The preparation of financial records and bookkeeping
- The leasing property for offices or accommodation of employees
- Holding meetings in Labuan
- Having interest debt obligations in other Labuan corporations , domestic or offshore
Interestingly, the Labuan Offshore Companies Act was later amended to allow Malaysia residents to own offshore companies, subject to certain conditions.
The Labuan offshore company with limited liability must denote such in the company’s name by using any one of the endings Corporation, Incorporated, Limited, Sociètè Anonyme or Sociedad Anonima or the relevant abbreviations. .The Malaysian word Berhad can be used but it must be preceded by “(L)” to denote that the company is incorporated in Labuan.
Offshore Companies that are trading can elect to pay 3% on net audited profits or the sum of RM 20,000. Offshore Companies that do not trade do not pay tax. Non-trading (i.e. investment and holding companies) and trading companies which elect to pay tax of RM 20,000 p.a. are not required to file financial statements, and do not have to employ an auditor unless they are offshore banks or insurance companies. A trading company which pays 3% of audited net profits is required to appoint an auditor and file audited financial statements.
The registration fees for Labuan Offshore Companies is dependent on the authorized capital, but is considered nominal in rate.
Because Labuan is part of Malaysia, Malaysia company law applies in Labuan. Labuan companies will use the Offshore Company or the Offshore Limited Partnership to achieve offshore status.