Labuan Offshore Guide
Labuan is an island that is situated in East Malaysia, lying at the northwest coast of Borneo, north of Brunei facing the South China Sea. It is a very peaceful town with tropical climate free from hurricanes and typhoons predominantly good climate reigning all year round. Labuan consists of six secondary islands namely Kuraman, Papan, Daat, Rusukan Kecil, Burung, and Rusukan Besar adjoining the main Labuan Island. Labuan was declared a Federal Territory on 1984.
The land is mainly flat and most of the land is utilized for property and industrial use geared for residential and tourism objectives. Most of the industries on the southwestern side of the island include ship building, oil, manufacturing, and gas industries.
The year 1989 marked a very significant event in the whole territory of Labuan. This was the year when the Malaysian Government acknowledged Labuan as an International Offshore Financial Centre, which gave way to the ratification of the Offshore Companies Act in 1990. Due to the continuing and conscientious involvement of the Malaysian Government with the progress and advancement of the island, Labuan was able to claim recognition as one of the leading offshore centers in Asia. Many offshore companies settled for the exceptionally attractive business environment that Labuan has to offer.
Labuan is an offshore tax haven because no tax is compulsory on the income of offshore companies in Labuan. This includes non-trading companies performing offshore non-trading activities like holding shares, taking loans or placing deposits with no auditing required for their company books and accounts. Labuan offshore companies are not required to pay withholding taxes for their dividends, regardless if they are classified as trading or non-trading companies; in addition to enjoying the benefits of Malaysia’s 40 plus double taxation treaties by means of local company agents or directly. No tax is required for inheritance, death, and estate.
Every transaction of offshore companies are strictly kept confidential as stated in the ratified Offshore Companies Act 1990, which prohibits revelation of information unless ordered by court. Labuan is a perfect environment for offshore companies because of the sophisticated and state-of the- art facilities in the banking system and telecommunications in addition to the safe and stable political environment.
Labuan has no restrictions regarding registration of branches of foreign companies.
With regards to investment, there are no required minimum capital requirements; however, bank, insurance company or fund manager must comply with the capital requirements as stated by the government of Labuan. A series of personal tax concessions are considered as privileges that foreign employees of Labuan offshore companies are out to enjoy. On the other hand, Labuan residents can take pleasure from other concessions including up to 50% discount on personal vehicle’s custom and excise import tax.
Offshore Companies Corporate Requirements
In Labuan, trading offshore companies are required to pay 3% tax rate on audited net profits; accounts should be properly maintained and audited every year, while non-trading companies are not required to pay taxes in the actual fiscal year provided that they report non-trading accounts.
Though Labuan is relatively undersized compared to other giant Offshore Financial Center like Hongkong and Singapore effective promotion can create the path for Labuan to be more competitive. This would be easier to realize because Labuan is capable to offer excellent banking facilities surrounded by various tax incentives to attract any kind of business.