- Continent: Asia
- Minimum paid-up capital: USD 1
- Local manager required: No
- Disclosure of beneficial owners: No
- Audit obligation: No
- Obligation to submit an annual report: Yes
- EU VAT ID available: No
- Tax system: Preferential tax Territorial taxation
Labuan is the most advanced centre of Malaysia for offshore company registration and financial operations. Offshore companies working here must pay 3% income tax on their profits for trading activities, but they can also chose a flat-rate tax the amount of which is RM 20,000 per year. At the same time, in the framework of territorial-based taxation, profit is only taxed if the economic activities are being pursued inside Malaysia. These activities include negotiations between business partners as well as the conclusion of contracts. Tax exemption can easily be achieved in practice if the company does not have a local manager as in this case the business activity is not pursued in Malaysia. All of the above shows that if the company’s dealings are not carried out in Malaysia, the company’s profit will be totally tax-free, thanks to the territorial-based tax system. And if the company does not pursue any trading activities, any profit it makes is exempt from tax.
The equity of the business must be at least USD 1, which must be paid up by the shareholders. The company must have at least one manager, one company secretary and one shareholder. Only the company secretary must be a resident of Malaysia. There are no restrictions on whether they should be legal entities or natural persons. The business must have a local address, which qualifies as its official seat. The company is entitled to transfer its official address to another country at any time. The company is required to keep records of its business operations.
In addition to the exemption of taxes presented above, it is also important to note that Malaysia has concluded an agreement with a number of countries to avoid double taxation. Therefore, with careful tax planning, it is possible to achieve additional tax benefits not only for international trading transactions and holding companies but in the case of private foundations too; in addition, thanks to the joint tax treaties made with several other countries, Malaysia is not regarded as a jurisdiction for offshore company registration.