6 Benefits of setting up an offshore company in Labuan
Firstly, it is important to note that there is nothing illegal about company formation in an offshore place like in Labuan. There are many legitimate reasons for people to set up their own companies in offshore jurisdictions and here are some benefits of incorporating and forming an offshore company in Labuan.
While a corporation or a limited liability company (LLC) does offer asset protection, an offshore company is the more effective in protecting your hard-earned assets (such as real estate investments and intellectual property) from frivolous and vengeful lawsuits.
An offshore company can legally minimize your business tax obligations due to the offshore’s low/zero tax jurisdiction.
For example, Labuan’s tax rate is 3% of audited net profits or fixed tax of RM20,000 for companies involved in trading activities (including import and export).
For Labuan companies solely for investment holding purposes, there will be no tax charges and audit reports are not required.
In addition, the Labuan tax regime unique features are
- Less tax filing obligation
- No estimation of income and bi-monthly deductions
- Perpetual tax exemptions
- Labuan entities may access benefits under the Malaysia Double Taxation Agreements (DTAs); and
- Labuan entities can invest in domestic companies while enjoying the tax exemptions accorded in Labuan IBFC.
Ease of succession/transfer of ownership
For people who own multiple properties in different countries, using an offshore holding company is a practical administrative strategy that minimizes probate when you pass away.
Imagine this, you own properties in your own name in other countries. When you pass away, your family or heirs will have to deal with probate in those countries. This means lengthy and complicated processes of navigating various inheritance laws. The results may or may not match your wishes and might even incur financial burdens for them to inherit your real estate investments.
Utilizing an offshore entity such as a Labuan company for property investment purposes, you can own the company 100% with single ownership or with multiple partners. There will be no inheritance tax and disposals/transfers can be done by the way of shares transfer.
Most offshore location, including Labuan, offers the benefit of anonymity and privacy. Important information such as the shareholders, directors or beneficiaries of the company will not be disclosed by the registrar nor will they be publicly published.
Provided that there are no suspicions of criminal or terrorist activities, your entity in Labuan enjoys complete anonymity.
Reduced administrative obligations and lower set-up and maintenance costs
The legal obligations of any directors or officers of offshore companies are often more relaxed than LLCs. Most offshore companies make use of virtual office services, for accounting needs, employees/staff or a physical office, as this is more cost effective.
The process of setting up an offshore company in Labuan is relatively fast and simple. This translates to lower costs for both establishing and maintaining an offshore company.
Low Capital and Shareholding Requirements
For Labuan’s jurisdiction, a minimum of one share is required. Apart from this, there is no minimum capital requirement.
Labuan companies may issue shares of different classes and different rights but no bearer shares are allowed.
Shares may be denominated in any currency EXCEPT in Malaysian Ringgit.
The minimum number of shareholders in a Labuan offshore company is one. The shareholder may be an individual, a corporation or a trust company holding the shares as a nominee, or on trust.
Do you require further clarifications?
Ask our friendly consultants today on how an offshore company in Labuan can benefit you. No obligations, we are here to help.