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Offshore for Asia – Labuan Offshore Company Guide November 2008 The information contained in this guide is educational and intended for informational purposes only. It does not constitute legal, accounting, professional or other advice or services, nor is it a substitute for such professional advice or services. Although every attempt has been made to check the accuracy of this guide, Labuan IBFC Incorporated Sdn. Bhd. accepts no responsibility whatsoever for any errors, mis-statements, inaccuracies or omission.
‘Offshore for Asia-Labuan Offshore Company Guide’ is meant to be a complete and authoritive manual for people interested to learn more about Labuan offshore company structures as well as their beneﬁts. As such, it will be a valuable source of reference for professionals including lawyers, accountants, advisors, company secretaries, and others such as decision makers. The scope is therefore on company issues with the Offshore Companies Act 1990 as the starting point. This Labuan Offshore Company Guide is unique in that it is a distillation of practical knowledge derived from my years of involvement in offshore business in Labuan IBFC. Its value is that it contains some information which cannot be found by searching the internet. The Guide highlights the main provisions in the Offshore Companies Act 1990 relating to company incorporation, administration and current compliance. The Guide also explains some of the more pertinent rules affecting a Labuan offshore company. Special features include the new annual fee structure for Labuan offshore companies and the provision allowing Labuan offshore companies to be taxed under the Malaysian Income Tax Act 1967. The laws and regulations mentioned are as at Nov. 2008-10-22 It is my hope that this Guide will help professionals to better understand Labuan offshore company structures so that they will be fully equipped to advise their clients on the opportunities and services that await them in Labuan IBFC. The Guide in the present form is merely the ﬁrst stage . Given the changing global ﬁnancial scenario, I expect future editions may offer more coverage, updating and amendments. The Guide will also be accessible online from www.simplyoffshore.com, www.labuanibfc.my and www.offshore4asia.com
Ahmad Kamil Bin Mohd Yusop LL B(Hons), CLP Law & Commerce Trust Limited
Introduction to Labuan IBFC
Malaysia’s offshore ﬁnancial hub was established in 1990, operating under the name of Labuan International Offshore Financial Centre. It was re-named Labuan International Business and Financial Centre early in 2008 to reﬂect its growth and to meet the changes in the global economic environment. Labuan IBFC is strategically located with easy connections to many countries in the Asia Paciﬁc region and shares the same time zone as well. Since its inception, the jurisdiction has developed by leaps and bounds when measured by its current achievements such as over 6,500 offshore companies; more than 300 licenced ﬁnancial institutions including banks; and a full range of service providers like 23 trust companies that have established themselves on the island. Labuan IBFC is now embarking on an aggressive growth strategy to become the premier IBFC in the Asia Paciﬁc region. It is focused on ﬁve core areas viz. offshore holding companies; captive insurance; Shariah compliant Islamic Finance structures; public and private funds; and wealth management. Given the burgeoning interest around the world in Islamic ﬁnance, Labuan IBFC is well placed to enhance its lead in this sector. Labuan has another advantage as it has been involved from the start in the formation of the Malaysian International Islamic Finance Centre initiative launched in August 2006. The jurisdiction, under the robust but progressive regulatory body called Labuan Offshore Financial Services Authority (LOFSA), offers trading companies the beneﬁts of 3% tax on net audited results or a ﬂat rate of RM20,000; low operational costs; liberal exchange controls; and a host of other advantages There is also a ﬁnancial exchange called the Labuan Financial Exchange or LFX for listing and trading purposes. This is an essential step-by-step guide for those intending to establish an offshore company in Labuan IBFC whether for themselves or on behalf of their clients.
Part I: Introduction
1. 2. Offshore companies:deﬁnitions Offshore beneﬁts
page 1 - 4
Part II: How to set up
3. 4. 5. 6. 7. 8. Governing law in Labuan IBFC Formation of Labuan offshore company Types of companies Memorandum of Association Permitted purpose for incorporation Prohibition against dealing with Malaysian residents
page 5 - 10
Part III: Company matters
9. 10. 11. 12. 13. 14. 15. 16. 17. Lodgement of documents Share capital Share subscription Preference and redeemable shares Dealing with own shares Reduction of capital Members Registered ofﬁce of an offshore company Name, etc on letters and documents
page 11 - 14
Part IV: Company procedures
18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. Ofﬁcers Secretary Meetings Notice of meeting Quorum Resolutions Special resolutions Keeping of minutes Annual returns Annual fee Register of members Ultra vires transactions Company seal
page 15 - 20
50. strike off. 41. 30. Accounts and audit Approved auditors & liquidators Dividends Arrangements & reconstructions Take over & mergers Winding up. Taxation of company Application for tax resident status Personal taxes Double taxation relief Anti-money laundering law Secrecy Exchange control page 27 . 47. 33.26 Part VI: Taxation 38. 42. etc. Expatriate employment in Labuan IBFC Offshore bank accounts Licensable or regulated business in Labuan IBFC Exemptions and incentives Summary of features and beneﬁts Business and Regulatory Guidelines Frequently asked questions. Redomiciliation page 21 . 32. incentives and guidelines 45. 36. 44. 46.48 . 51. 34. 37. 48.Part V: Accounts and audit 31. 35.34 Part VII: Expatriate employment. 49. 43. 40. page 35 .
i) ii) iii) iv) v) separate but more favourable corporate legislation to non-residents. “Exempt Companies”. the following types of companies are used for tax planning and international business: 1) International Business Companies or IBCs1 These are zero tax offshore companies incorporated in jurisdictions often described as tax haven islands such as the British Virgin Islands. vii) availability of tax minimization vehicles. Nevada. companies incorporated in the American states like Delaware. vi) liberal exchange control policy. favourable tax treatment for business activities with non-residents. “ring fencing” or the prohibition of business dealings between domestic companies and offshore entities. Bermuda.PA R T I: IN TR OD U C TION 1. asset protection and tax planning. government support and encouragement. British Virgin Islands. Wyoming. viii) strong or majority reliance on ﬁnancial services A few examples of such jurisdictions are Labuan. 1 Other synonyms are “Business Company” or “BC” . Types of offshore companies Typically. Regardless of their descriptions. In the context of ‘offshore business’ and ‘offshore company’ the words refer to matters relating to the structuring of international business. these companies usually share all or some of the above beneﬁts. In addition to “offshore companies” incorporated in these jurisdictions. For example. Bermuda. “International Trading Company” or “ITC”. where none of the above features seem to be offered. Brunei. Jersey and the Isle of Man. the term “offshore companies” traditionally refers to companies incorporated in offshore jurisdictions. “International Trading Companies” or “ITC”. For example. Nauru and the Seychelles. conﬁdentiality treatment for offshore companies. Mauritius. However it should be noted that the traditional deﬁnition of offshore companies is no longer applicable. Belize. there are also entities popularly known as “International Business Companies” or “IBC”. etc. “Limited Liability Companies” or “LLC”. Bahamas. family wealth management. Such jurisdictions usually offer all or any combinations of the following. any place outside of India is “offshore” to him. etc. if A lives in India. 1 . Deﬁnition of offshore companies The terms “offshore business” and “offshore company” have no precise legal. Speciﬁcally. tax or general business meaning. The term “offshore” usually refers to the physical location of the person using the word. “Global Business Company” or “GBC” or “Exempt Company”.
either alone or in conjunction with a Malaysian domestic company is used as a tax planning vehicle to access Malaysia’s numerous Double Taxation Treaties. Labuan has two types of companies. if all the members or partners of LLCs and LLPs are non tax resident in the domicile of the LLCs or LLPs and no business is conducted in that country. Hong Kong. 2 Companies incorporated onshore in countries which have tax regimes that are by statute tax advantageous for speciﬁc international purposes. The former.2) Offshore companies This traditionally refers to companies incorporated in jurisdictions which offer both offshore companies and onshore companies but the offshore companies may beneﬁt from favourable tax and corporate regimes. although not typically regarded as a tax haven. In most cases. we mean that proﬁts are divided among the members. international business and tax planning because they have the advantage of limited liability but the ﬂow-through characteristics of a partnership for tax purposes. This type of tax regulation is known as “territorial taxation”. neither the LLCs or LLPs nor members or partners will be taxed in the company’s country of establishment. Luxembourg. The “Labuan offshore companies” enjoy speciﬁc tax. The latter is a zero tax company which may be used more or less in the same manner as the Business Company in BVI or the Brunei IBC. Mauritius has two types of companies that are used for offshore business and international tax planning. provided that any proﬁts arising are not derived in Hong Kong. while the Mauritius Global Business Company I is tax resident and typically utilised for double tax treaty and international tax planning advantages. LLCs and LLPs are hybrid companies which are used for offshore business. 4) Onshore company 2 Hong Kong. Such companies are said to be “ﬁscally transparent” and examples include the LLCs in the U. 3) Limited Liability Company (LLC) and the Limited Liability Partnership (LLP). namely local “Sdn Bhd” company and “Labuan offshore company”. Fiscally.S. LLCs in the Isle of Man and LLPs in the United Kingdom. For example. has a favourable tax regime which effectively means that correctly structured. in proportion to their respective holdings. Examples are Singapore. and are taxed in their respective hands. The Mauritius Global Business Company II pays zero tax and is effectively a tax haven company. By this. similar in many respects to a BVI Business Company. 2 . states of Delaware or Nevada. the Labuan offshore company may be categorized as either offshore company carrying on an offshore business activity which is an offshore trading activity or an offshore company carrying on offshore business activity which is an offshore non-trading activity. managed and administered Hong Kong companies can be utilised to conduct offshore business and international business without paying tax in Hong Kong. regulatory and conﬁdentiality advantages over the “Sdn Bhd” companies. Denmark and the Netherlands.
successful implementation of such companies is dependent on a wide variety of issues. Some offshore banks do not accept opening a company account for internet business as this type of business poses greater money laundering risk.3 Conﬁdentiality:4 Most offshore companies are shielded by some form of conﬁdentiality provision. wealth management and tax planning are numerous. For example. Reduced Tax: Most offshore companies enjoy zero or low corporate tax. Belgium. the term “offshore companies” refers to all or any one of the four categories of offshore companies previously mentioned. provided the business conducted is a legitimate one. 2. Luxembourg and the Netherlands. This conﬁdentiality feature not only shields the owner from unwanted publicity but also from preying eyes. The above issues are often complicated. 3 . 3 4 5 6 An onshore trading company must be aware of transfer pricing rules when structuring its international trading business in offshore centres. Offshore advantages in general Regardless of the above. Greece. either alone or with an offshore trust may be used to enhance protection of assets. requiring cross-border tax planning knowledge and experience. often no real or signiﬁcant physical presence is required. controlled foreign company. onshore countries as diverse as the UK. Cost saving: Due to this high mobility and the expansion of virtual activities. it would be extremely difﬁcult for a third party to inquire into the identity of the owner and the affairs or management of an offshore company unless the owner gives consent or disclosure is obtained through a court order. This means signiﬁcant cost advantage in using offshore companies. Provided that the tax law of the country of origin is carefully considered. transfer pricing. asset protection. double tax avoidance. No local licensing and staff are required. The proliferation of service ofﬁces and virtual ofﬁces facilitates the operation of offshore businesses. Switzerland. consultancy. Conduit for mobile and borderless business: Many offshore companies are being used as conduits to conduct borderless and highly mobile business. Expert implementation is certainly required to create structures domiciled in high tax. Portugal. Singapore.While almost all countries offer tax regulations of one kind or another to encourage inward investment. Such issues are anti-avoidance provisions. Examples of such businesses are ﬁnancial advisory. participation exemptions. Austria.6 Asset protection: A correctly structured offshore company. capital gains tax and a myriad of other ever-changing tax regulation. Undoubtedly this is one of the most sought after beneﬁts. It is impossible to list all of them but some of the most common are discussed below. internet business5 or investment in the world exchanges. the use of offshore companies can offer legitimate and signiﬁcant tax advantages. The beneﬁcial owner ceases to be connected to. Any asset owned by an offshore company which in turn is owned by a trust gives extra asset protection features. or with. his assets and achieves anonymity in relation to his assets. thin capitalisation. Most offshore centres in the world have in place legislation prohibiting money laundering. Unless otherwise stated. Spain. the beneﬁts of using offshore companies as a conduit for international business. An offshore company normally has an in-built conﬁdentiality feature which makes tracing of ownership daunting if not impossible. management and control tests.
royalty and copyright holding ship management and yacht ownership personal and corporate tax planning banking. By using an offshore company as a vehicle. xv. Real estate holding: An offshore company is frequently interposed to own property to avoid inheritance tax and capital gains tax. xiii. vi. international trading investment holdings inter company ﬁnancing professional services or consultancy patent. High net worth persons from politically unstable countries have often used offshore structures and centres as their ﬁnancial refuge. notably Switzerland. Access to tax treaties: Double tax treaty beneﬁts may be enjoyed by using companies in jurisdictions that have signed numerous DTAs with other countries. xii. xiv. Examples of such jurisdictions are Mauritius. viii. iii. life insurance and reinsurance companies international shipping and air transport companies international joint venture companies for property management mutual fund companies trust companies internet marketing companies 4 . x. ix. Various commercial uses: The principal commercial uses of offshore companies are numerous. transferring funds to an offshore location where the funds can be deposited with an offshore bank and invested with greater security. they can avoid death or estate duties . vii.Liberal exchange control policy: Most offshore centres adopt very liberal exchange control policies which allow free remittance of proﬁts and capital. offer very signiﬁcant banking privacy beneﬁts. Other major banking centres like Singapore and Hong Kong are equally well known and popular. The major beneﬁt is that DTAs allow tax relief that can signiﬁcantly reduce withholding tax rates. Cyprus and the Netherlands Antilles. v. Banking privacy: Some jurisdictions. ii. ﬁnance and treasury management companies debt securities issuing companies international headquarters and administrative companies brokerage and leasing companies insurance. some of which are: i. xvi. Labuan. xvii. iv. The search for political stability: There are many investors in the world who live in countries with less than desirable levels of political and economic stability. xi.
LOFSA exercises sole regulatory function on all Labuan offshore companies. Act A998. No less important was the removal of the rule that prohibited Malaysian residents from owning shares in Labuan offshore companies. Prior to October 1990 when the Act was enforced. the Central Bank.13 7 8 9 10 11 12 13 Subs.12 Instead. to enhance the delivery system in Labuan IBFC. 5 . in which case the regulator is not LOFSA but the Companies Commission of Malaysia. In mid 2008.PA R T II: H OW TO S E T U P 3.10 The domestic counterpart of the OCA 1990 . Labuan IBFC Incorporated Sdn Bhd is a subsidiary of Bank Negara of Malaysia. Further. Labuan IBFC Incorporated Sdn Bhd. Governing law in Labuan IBFC The Offshore Companies Act 1990 (OCA 1990) is the legislation that governs all Labuan offshore companies. Labuan IBFC Incorporated Sdn Bhd is the ofﬁcial agency sanctioned by the Government of Malaysia to market Labuan IBFC as a premier International Business & Financial Centre in Asia Paciﬁc.does not apply11 to Labuan offshore companies except in winding up (See Part VIII and Part X of Companies Act 1965 and The Companies (Winding-Up) Rules 1972). The Offshore Companies Act 1990 has been amended a few times since it was passed. Labuan Offshore Financial Centre was renamed Labuan International Business & Financial Centre or LIBFC. the body responsible for regulating Labuan offshore companies was the then Registrar of Companies. “Registrar means the Labuan Offshore Financial Services Authority established under the Labuan Offshore Financial Services Authority Act 1990. electronic lodgement called the EDSP 9 was introduced which allowed all lodgements to the Registrar by trust companies to be done electronically. Electronic Documents Submission & Payment Section 9A OCA Section 5 OCA 1990 Sections 131(1) and 131(2) OCA 1990 A “Sdn Bhd” designates a domestic company rather than a Labuan offshore company. The role to market the jurisdiction was handed over to a newly incorporated company. following the re-branding exercise. This choice is deliberate and in accordance with corporate governance principles.the Companies Act 1965. Section 2 OCA 1990. now the Companies Commission of Malaysia. Among the major amendments was the appointment of Labuan Offshore Financial Authority7 (LOFSA) as the Registrar8 in 1996 in place of the then Registrar of Companies.
this is also not registerable. The word “Limited” or the abbreviation “Ltd. So is a name that ends with LLP as “LLP” refers to Limited Liability Partnership. by subscribing its or his name to a memorandum and complying with the requirements in the registration. the nature of business of the company. it is undesirable or is a proper name. The reason is that the term “LLC” in its popular use refers to a hybrid company which in essence is more a partnership rather than a true company limited by shares.18 Every offshore company must be a company limited by shares.V.”.T.4. any word or words in the national language of any country which connote a joint stock company limited by shares. A Labuan offshore company may include the word “Berhad” or the abbreviation “Bhd.”. the words “Perseroan Terbatas” or the abbreviation “P. or any abbreviation thereof.”. company secretary and trust company: size and denomination of share capital. form an offshore company.14 The application should indicate why the name is selected and the nature of business to be conducted by the applicant company.”. Names are not allowed where. The words “Society Anonyme” or “Sociedad Anonima” or the abbreviation “S. In romanised characters. How to form a Labuan offshore company The ﬁrst step in forming a Labuan offshore company is to get approval from LOFSA of the required name by using the services of a trust company.”.” as part of its name provided it has the word “(L)” as part of its name.”. registered address.” or “Inc. The words “Aktiengesellschaft” or the abbreviation “A.19 Application to incorporate can only be handled by a Labuan trust company who must then submit the Memorandum and Articles of associations with the following details: i) ii) iii) iv) names of directors and shareholders. and similarly as “LLC” refers to “Limited Liability Company”. 14 15 16 17 18 19 The term trust company or Labuan trust company refers to a trust company registered under Section 4 of The Labuan Trust Companies Act 1990. Names in Chinese characters are not registerable. The words “Public Limited Company” or the abbreviation “PLC. in the opinion of the Registrar.”. Similar procedures and rules apply when a company seeks to change the name of an existing company. Section 21(1) OCA 1990 Section 21(2) OCA 1990 Section 21(2B) OCA 1990 Section 14(1) OCA 1990 Section 14(3) OCA 1990 6 . The words “Naamloze Vennootschap” or the abbreviation “N.A.17 A trust company or any other person may.G.15 The name shall have any of the following description: 16 a) b) c) d) e) f) g) h) The word “Corporation” or the word “Incorporated” or the abbreviation “Corp. or includes a name of a kind that the Registrar is not willing to accept for registration.
5. No hard copy is required to be ﬁled. Due diligence requirement: Trust companies are “reporting institutions”20 under the Anti-Money Laundering & Anti-Terrorism Financing Act 2001 or AML/ATF Act. the certiﬁcates of incorporation must be veriﬁed too. bankers or company secretaries. notary public. Such a policy will require them to look at the nature of the client’s business to determine if the business is genuine. Trust companies are also required to have their own ‘Know Your Customer’ policy or KYC. and vii) declaration that the requirements of the OCA 1990 in respect to all matters precedent and incidental to the registration have been complied with. Trust companies therefore are required to know the true identity of the beneﬁcial owners of Labuan offshore companies. Companies that do not fall under the above are deemed private companies. the OCA 1990 contains provisions governing invitation to the public. The KYC policy is often an on-going process requiring trust companies to be vigilant not only at the engagement stage but also through the duration of the provision of services to their clients. Payment for ﬁling fees is made by auto deduction by LOFSA from the trust company’s HSBCnet account. No cheque or cash payment is made to LOFSA. issues an invitation or distributes application forms to the public to subscribe for shares or debentures with it. This means knowing exactly who they are providing services to and not just knowing their client’s agent or reps. vi) percentage of shareholding. 20 21 22 Section 3 Anti-Money Laundering Act 2001 Section 15 CA 1965 Part VI. However. The policy may similarly require production of proof of address and a professional or banker’s reference regarding the client and his business. accountants.v) address of directors. All submissions are made online through the EDSP. Trust companies are required to report suspicious activities to the Financial Intelligence Unit which is under the purview of Bank Negara Malaysia. In the case of individual directors and shareholders. an entity is a public company if it: a) b) c) issues an invitation to the public to deposit money or lend money to it. shareholders and secretary. true identity can be established by obtaining copies of passports or identity cards which have been veriﬁed by lawyers. 21 the OCA 1990 makes no express distinction between private and public companies. and the invitation is not addressed to a restricted circle of persons and the number of persons exceeds twenty. Types of companies Unlike its domestic counterpart.22 Generally. from Sections 28 to 42 of OCA 1990 7 . In the case of corporate directors and shareholders.
charter. there is no “Standard Table” to be used. 7. from or through Labuan.Whether an offshore company is private or public. from or through Labuan. Permitted purpose of incorporation An offshore company may carry on any business which may be lawfully conducted in Malaysia in. a Labuan offshore company can be classiﬁed either as: a) company carrying on offshore business activity which is an offshore trading activity. or. ii) the objects of the offshore company. and v) a declaration by the subscriber to the memorandum of association stating his desire to form an offshore company and agreeing to take the number of shares allocated to him.25 i) the name of the offshore company. iii) the amount of the share capital with which it is proposed to be registered and the division thereof into shares of ﬁxed amount. Unlike in the domestic practice. society.28 23 24 25 25 27 28 Section 2(1) OCA 1990 Section 121(2) OCA 1990 Section 18(1) OCA 1990 Section 7(1) OCA 1990. Section 7(2) OCA 1990. The Memorandum of Association must be dated.) A foreign company means a company. printed and divided into numbered paragraphs and contain the following. b) company carrying on offshore business activity which is an offshore non-trading activity.27 This provision must be adhered to as it is the compliance of this provision that will ensure the Labuan offshore company enjoys the taxation beneﬁts under the Labuan Offshore Business Activity Tax Act 1990 or LOBATA 1990. There is however a tendency to describe the former as “trading company” and the latter as “non-trading company. Registration must be made through a trust company by submitting a copy of its certiﬁcate of incorporation. The Memorandum and Articles may be amended by a special resolution of the members of the offshore company. For tax purposes. All trust companies use their own standard Memorandum of Association. iv) full name and address of each subscriber. An offshore company must carry on business in. a more signiﬁcant classiﬁcation is made based on taxation applicable to the offshore company. association or body incorporated outside of Malaysia. Section 2 of the Labuan Offshore Business Activity Tax Act 1990 states that “offshore business activity” means an offshore trading or an offshore non trading activity carried on in or from Labuan…” 8 . a memorandum appointing the trust company as its agent and a statutory declaration made by an ofﬁcer of the trust company.26 An offshore company may not carry on licensable business unless licensed accordingly. statute or memorandum. list of directors and ofﬁcers. Memorandum of Association The Memorandum of Association must be submitted to LOFSA at the time an offshore company is formed.23 Foreign companies may apply to the Registrar for registration as “foreign offshore company”.24 6.” (Detailed discussion on this classiﬁcation is found below.
and ii) the transaction undertaken by the Labuan offshore company and the resident (where applicable) has obtained the necessary approval from the relevant domestic regulatory authorities like BNM. FIC. Further and pursuant to a clariﬁcation31 by LOFSA. a citizen or permanent resident of Malaysia or any other person who has established a place of business and is operating in Malaysia. care should be taken by clients or investors establishing and structuring a Labuan offshore company especially the location and the manner in which an offshore company’s business is carried out.32 29 30 31 32 * Section 7(3) (a) OCA 1990 Section 2(1) OCA 1990 This clariﬁcation is pursuant to a letter from LOFSA dated 27September 2007 Section 7(3) (a) OCA 1990 states that “No offshore company shall carry on business with a resident of Malaysia except as permitted by the Offshore Banking Act 1990 or by the Registrar.30 A Labuan offshore company that is not to be treated as carrying on business with a resident of Malaysia by reason only thata) b) c) d) it maintains a bank account with a bank in Malaysia. SEC. from or through Labuan”.” It is submitted that approval too must be obtained from the Inland Revenue Board whether or not such dealing will be considered by the Inland Revenue Board as “offshore trading activity” or otherwise 9 . In the absence of any Court case deciding the meaning of “carrying on business in.29 Resident means a natural person. Prohibition against dealing with Malaysian residents Unless permitted by LOFSA. holds lease of property.* The notice should at least specify a) details of the transaction/investment. it hires professionals to do work for it. and wholly own a domestic company to conduct offshore business. the following transactions between a Labuan offshore company with a related Malaysian domestic company or individual or vice versa do not require approval from LOFSA under Section 7(3) (a) OCA 1990. and c) total amount and source of funding in the transaction or investment. and a resident of Malaysia holds shares in it.There have been instances where the Inland Revenue of Malaysia determined that a Labuan offshore company that did not conduct its business in. invest in a domestic company. from or through Labuan was subject to tax under the Income Tax Act 1967 or ITA 1967. etc. holds meetings in Malaysia. 8. it prepares books and accounts in Malaysia. holds shares in one or other offshore companies. An exemption was recently given by LOFSA in the form of a blanket approval allowing a Labuan offshore company to deal with a resident as follows: i) ii) iii) carrying on business with a resident. The blanket approval is subject to the conditions that i) the Labuan offshore company sends notice (in a prescribed form) to LOFSA not later than 10 days from the date of transaction that took place with the resident. a Labuan offshore company is prohibited from carrying on business activities with a resident of Malaysia. etc. b) the rationale and advantage of the transaction using a Labuan offshore company including tax beneﬁts.
37 carrying on shipping operation in Malaysia. Section 7(3) (c) OCA 1990. or carrying on any business of a trust company. rental. ofﬁce upkeep and similar expenses. loan that involves any interest or fee irrespective of the purpose of the loan given. The total amount of the loan payment or advance shall not exceed RM100 million in aggregate in a year. Two companies are related companies if one is the holding of the other. loan without interest or fees.e. government fees and licence fees. rates. insurance. loan carrying interest or fee. A Labuan offshore company is also prohibited from doing or engaging in any of the following: a) b) c) d) carrying on banking.33 In the absence of any guidelines as to the circumstances in which an individual is related to a Labuan offshore company.e. It could further be extended to cases where an individual is a director or shareholder of the Labuan offshore company’s parent or subsidiary. 33 34 35 36 37 Section 4 OCA 1990 Section 7(3)(b) OCA 1990 Administrative expenses should include payment of salary. i. loan that does not involve any interest or fee irrespective of the purpose of the loan given.a) b) c) advances or payment made to each other for whatever purpose. reinsurance or trust company businesses unless licensed to do so. 34 carrying on business in Malaysian Ringgit except for paying its administrative35 and statutory36 expenses. or is a subsidiary of the other or is a subsidiary of the holding company. 10 . Some examples of statutory expenses are taxes. it is submitted that at least the director and the shareholder of the Labuan company are individuals related to the Labuan offshore company. i.
000 pays capital fee of RM2. An offshore company with authorised capital of RM50. every application for any extract or copy of any certiﬁcate or any documents lodged with the Registrar must be made through a trust company.40 The original copies of the documents ﬁled or lodged electronically through the EDSP shall be kept at the ofﬁce of the trust company at all times. However a member may apply for a certiﬁcate. As a measure to enhance LOFSA’s delivery process. document or extract if they are for his own personal use. Lodgement of documents All documents required to be lodged with the Registrar must be lodged or ﬁled through a trust company. called the EDSP.000 as capital fee.38 Similarly. this is rare if allowed at all. Register of shareholder is not a public record and the use of nominee shareholder is very common.39 All trust companies are required to be subscribers of the EDSP. A document is deemed to have satisﬁed the requirement for lodgement or ﬁling of document if it is transmitted to the Registrar through the EDSP.000. It must be noted that capital fee is a one-time fee. The United States Dollar is the most common currency denomination. A copy or extract of any document electronically ﬁled or lodged through the EDSP and duly certiﬁed by the Registrar as a true copy or extract from that document shall be admissible as evidence in any proceedings with equal validity as the original document. 38 39 40 Section 9(1) OCA 1990 Section 9A(1) OCA 1990 Section 9B 11 . Capital duty payable is based on the size of authorised capital.000 or more but less than RM1.000. In practice. There is no restriction on the nationality of shareholders and the minimum of one shareholder is required.000. the OCA 1990 was amended to enable the Registrar to provide electronic lodgement or ﬁling of documents. The EDSP is open only to trust companies. Share capital Shares of an offshore company may be in any currency except the Ringgit. Bearer share is not permitted so each shareholder must be registered.000 RM2. There are only three capital fee bands namely: a) b) c) RM1. 10.000 and RM5.000 An offshore company with authorised capital not exceeding the equivalent of RM50.000 in foreign currency pays RM1.000 in foreign currency pays RM5.PA R T III : C OMPA N Y MATT E RS 9.000 and an offshore company with authorised capital exceeding the equivalent of RM1.
Such rights should cover right to repayment of capital. Further. right to participation in surplus assets and proﬁts. Where an offshore company makes any allotment of shares.44 41 42 43 44 In most IBC jurisdictions. consolidate and divide its shares. Shares in an offshore company may be paid in full in cash or in kind. shares shall not be redeemed except out of proﬁts and fully paid for. A minimum of one share needs to be subscribed and all shares subscribed must be registered shares. Preference and redeemable shares An offshore company is not allowed to issue preference shares or convert ordinary shares to preference shares. Section 43(1) OCA 1990 Section 54(1) OCA 1990 Section 55 OCA 1990 12 . partly paid or unpaid. No redemption shall have the effect of reducing the amount of authorised capital of the offshore company. do any of the following: i) ii) iii) iv) v) increase its capital by creating new shares.42 An offshore company may. There is no difference between initial subscriber 41 and member as all subscribers are taken as members and details entered in the members’ register. assignment of assets or a statement by an accountant or auditor of the availability of the assets. right to receive dividends. by altering its articles. the offshore company must lodge a return of allotment with the Registrar within one month of the date of the allotment. whether or not issued. right to vote and others. No shares need to be issued to subscribers. into shares of larger amount. Such proof may be bank deposit proof. unless its articles set out the rights of the holders. initial subscribers are the registered agents who are not recognised as members when subscribing shares. Subscribing for shares Initial shares may either be subscribed for by the ultimate shareholders or by a trust company. convert fully paid shares cancel un-issued shares 12. Any signiﬁcant shares purported to be fully paid issuance must be backed by a statutory declaration verifying the availability of the proof of assets backing the issuance. 11. thus allowing the registered agent to issue shares ﬁrst to registered owners.The issuance of shares is normally dealt with in the Articles and is usually authorised by the directors. The most common type of share is ordinary shares although the use of others like preference shares or founder shares can be employed. subdivide its shares. Without such proof no trust company will want to issue shares of high amount or value.43 An offshore company is allowed to issue redeemable preference shares if the redemption rights and terms are spelt out in the articles.
if so authorised by its articles. by special resolution and conﬁrmed by an order of the court.45 directly or indirectly for the purpose of purchasing its own shares or the shares of any of its subsidiaries or its holding company. 14. Members The minimum member is one and can be either a corporation or a natural person. The above purchases or assistance.13. or. there is no reasonable ground to believe that the company is not or would not have been insolvent after such assistance.” 13 . or. cancel any paid up capital which is lost or unrepresented by available assets. retiring redeemable preference shares. there is no reasonable ground to believe that the realisable value of the company’s assets will be less than its aggregate liabilities after giving the assistance An offshore company may also purchase its own shares for the purpose of: a) b) c) eliminating fractional shares. Reduction of capital An offshore company may.47 Initial subscriber or subscribers to the Memorandum of Association are considered as members and thus shares must be issued to them. the ﬁnancial assistance is given to its employees or employees of its subsidiaries or holding company. Dealing with own shares An offshore company may provide ﬁnancial assistance. or pay off any paid up share capital which is in excess of the needs of the company 15. or. paying dissenting shareholders. reduce its capital in any of the following ways:46 a) b) c) extinguish or reduce the liability on any of its shares in respect of share capital not paid up. Members of an offshore company shall be liable to the company only to the extent of the amount of shares unpaid on their shares but their liability as members is limited only to the amount unpaid on the shares held by them. if: a) b) c) d) the lending of money is part of the ordinary business of the offshore company. whether direct or indirect. There is no nationality requirement so anyone may be a member.48 45 46 47 48 Section 48 OCA 1990 Section 53(1) OCA 1990 Section 18(2) OCA 1990 Section 18(1) (e) “ that the subscriber or subscribers to the Memorandum are desirous of being formed into an offshore company in pursuance to the Memorandum and respectively agree to take the number of shares in the capital of the company set out opposite their respective names. shall be made only using the unreserved and unrestricted surplus available.
Registered ofﬁce of an offshore company Every offshore company is required to have a registered address and its registered address must be the principal address of a trust company in Labuan. The register must at all times be kept at the registered ofﬁce and be made available for inspection by any member free of charge.This is so even if the subscriber is a trust company or its ofﬁcer. Cayman. ii) The offshore company’s name must be displayed at the registered ofﬁce. 16. the number of shares held. Name. In Mauritius and BVI the word “subscriber” or “subscribe” is not used. 49 50 51 52 53 54 Most offshore jurisdictions with business company types like BVI. the amount paid on each share. If a change of registered address has taken place. addresses. occupations and dates of taking up and ceasing to hold ofﬁce. Section 105 OCA 1990 Section 85(1) OCA 1990 Section 85(2) OCA 1990 Section 85(3) OCA 1990 Section 86(1) OCA 1990 14 .52 Do remember that the registered address is provided merely to enable the Registrar or a third party to send notices or service of process but the registered address is not given as the main business address. notices. negotiable instruments and letters of credit. date ceasing to be a member. nationalities. etc on letters and documents An offshore company must paint.49 This will reduce the amount of administrative work involved in issuing shares and cancelling them later. the date when a shareholder was ﬁrst entered on the share register and the date when the shares were registered in his name. Brunei. afﬁx. The following must be kept at the registered address: i) the register of shareholders containing the names and addresses of the shareholders. Mauritius. statements of account. other ofﬁcial publications. order forms. Bahamas. and keep painted and afﬁxed its name in romanised letters in a conspicuous position outside its ofﬁce or its place of business. etc adopt this practice. date of allotment. a register of directors and secretaries which must contain certain prescribed details such as names. a notice must be lodged with the Registrar within one month of the change.54 Under the OCA 1990. The better practice is for a subscriber not to be considered a member and for that subscriber to be an authorised ofﬁcer of a trust company. number of shares allotted and share certiﬁcate number. invoices.53 17.51 Notiﬁcation must be made to the Registrar of the location of its registered address within one month after incorporation. An offshore company must keep a register of members50 containing details of each member’s names. the name of the company must appear in legible characters on all business letters. The register of members is a prima facie evidence of all matters recorded therein. addresses. date becoming a member.
been convicted of any act involving fraud or dishonesty. 55 56 Section 87(1) OCA 1990 Section 87(2) OCA 1990 15 . a directorship may be ﬁlled by a person appointed by the continuing director. He must not make improper use of any information acquired by him through his ofﬁce and gain advantage. Likewise. Prior to his appointment as a director. A person is disqualiﬁed from being a director of an offshore company if he has. either in Labuan or elsewhere: a) b) c) been convicted of an offence in connection with the promotion.55 Only an ofﬁcer of a trust company or a domestic company wholly owned by the trust company shall be appointed as a resident director of an offshore company. directly or indirectly. Secretary It is mandatory for an offshore company to appoint one or more secretaries. where there is a conﬂict arising between his duties in the company and his personal interest. must declare the nature of his interest. Ofﬁcers Resident director Every offshore company must have at least one director who may be a resident director. A resident director is entitled to vote without disclosing his interest as a director in other offshore companies. at least one of whom must be a resident secretary. 19. formation or management of a corporation. or adjudged bankrupt and is still undischarged. The ﬁrst director is normally appointed by the members and where there is casual vacancy. Directors’ duties Every director of an offshore company must at all times act honestly and use reasonable diligence in the discharge of his duties. A resident director shall not be subject to retirement but he may be replaced by another ofﬁcer of the trust company. a person must give his consent in writing to act as a director. A resident director is bound by the secrecy provision that prohibits him from disclosing any information he obtains by virtue of his ofﬁce unless he believes that fraud is or is likely to be practised by the offshore company.PA R T IV: C OMPA N Y P R OCE DURE S 18. Only an ofﬁcer of a trust company or a domestic company wholly owned by a trust company may be appointed as resident secretary.56 A director can be either a corporation or a natural person. A director who is in any way directly or indirectly an interested party in a contract with the company.
member or auditor of the company. free of charge. by participating by telephone or other electronic means. Therefore it is possible that an offshore company not even hold a members’ meeting in any particular year. A resident secretary has onerous duties under the OCA 1990. residential address or registered address in the case of corporate directors and corporate secretaries. He must be responsible for the compliance by the offshore company with the requirements of the OCA 1990. insurers or company secretaries or similar body recognised by the Registrar. or a person who holds a position of trust. or any person recognised by the Registrar as a person comparable to any person earlier mentioned. Meetings Annual General Meeting of members Unlike its domestic counterpart. equivalent to the aforesaid. A qualiﬁed trust ofﬁcer must have any one of the following qualiﬁcations:57 i) ii) an advocate and solicitor or a person who possesses a degree in law. there is no provision in the OCA 1990 that the ﬁrst members’ meeting must be held within 18 months from the date of incorporation and subsequently within 15 months. default or neglect. an associate or fellow of any association of bankers. Every offshore company must keep a register of its directors and secretaries which must contain details such as names. A meeting may be conducted by members either by attending in person. The register must at all times be kept at the registered ofﬁce and be made available for inspection by any director. 57 Regulation 2(d) of the Labuan Trust Companies Regulation 1990 16 . time and place within or outside Labuan as the directors consider necessary or desirable. A meeting of members may be convened in such manner. iii) iv) v) A secretary of an offshore company shall be appointed by the directors of the company. This includes lodging of documents. a person who has served for an uninterrupted period of not less than ten years in any public service or statutory body or in both. 20. maintenance of the company’s records at the registered ofﬁce and dealing with communications served to the company at its registered ofﬁce. a member of the Malaysian Institute of Accountants established under the Accountants Act 1967 or of any other association of accountants approved by the Registrar. A resident secretary shall not be responsible for any penalty provided under the OCA 1990 unless it is for anything done or omitted to be done by him in carrying out his duties. A meeting of members may also be convened on a request of ten or more members or members holding not less than one-tenth of the total paid up capital of the company. It is common for a company to have more than one secretary and it is also common to have a corporation act as secretary. identiﬁcation.Such an ofﬁcer must ﬁrst be a trust ofﬁcer approved by LOFSA. He is also not liable for any damage caused or suffered by any person unless such damage arises by reason of his wilful conduct.
Resolutions of members and resolutions of directors may be passed during a meeting or passed by way of resolution in writing. Unless otherwise provided in the articles. it shall give them notice in any manner allowed by the articles not less than fourteen days before meeting. of which not less than twenty-one days’ notice specifying the intention to propose the resolution as a special resolution has been duly given. shall be deemed properly given. 22. the directors of an offshore company must give not less than seven days’ notice of meetings of members.58 A resolution may be proposed and passed as a special resolution even if less than twenty-one days’ notice is given if members who collectively hold not less than seventy-ﬁve per cent of the total vote of members agree to it.59 58 59 Section 101 OCA 1990 Section 102 OCA 1990 17 . although not given to the company within the same time required by this section. cable or other written electronic communication without the need for any notice. the notice. Quorum Unless otherwise provided in the articles. 24. Special resolution A special resolution is one which has been passed by a majority of not less than three-fourths of the members at a meeting of members. after notice of the intention to move such resolution has been given to the company. or by telex. where an offshore company has more than one member and two or more members are present at a meeting of members. such a resolution shall not be effective unless notice of the intention to move it has been given to the offshore company not less than twentyeight days before the meeting.21. A meeting held in contravention of the notice requirement is generally still valid if members holding ninety percent majority have waived notice of the meeting. telefax. telegram. and the company shall give its members notice of any such resolution at the same time and in the same manner as it gives notice of the meeting. If that is not practicable. but if. Resolutions Every company has two groups namely the members and the board of directors. all shareholders vote as one class and each share has one vote. 23. the members present shall be a quorum at the meeting. a meeting is called for a date twenty-eight days or less after the notice has been given. At the meeting a chairman can be elected by the members present. Notice of meeting Unless the articles require a longer notice period. The decisions of the members and the board of directors are reﬂected in the resolutions they respectively pass. Where a resolution requires a special notice. Every member shall have one vote and it is common to specify in the articles that a chairman shall have a casting vote. Action agreed to be taken by members in a meeting may also be agreed by a resolution of all consenting members in writing.
resolution which has been agreed to by all members of the same class of shareholders. Copies of the accounts to which this certiﬁcate relate to must be kept by the auditors for seven years. The certiﬁcate of the director shall state that he has considered the audited accounts and he must certify with or without qualiﬁcation that: a) b) c) those accounts show the offshore company was solvent on the date it was made up. within fourteen days after the passing be lodged with the Registrar: 60 a) b) special resolution. not later than thirty days prior to the anniversary of the date of its incorporation. 26. resolution which has been agreed to by all the members of an offshore company. being a resolution which. if not agreed to.The following resolution shall. the annual return lodged with the Registrar must be accompanied by a certiﬁcate each from the auditor 64 and a director. Keeping of minutes Every offshore company must ensure that all minutes of meetings of members and minutes of meetings of directors are kept in a book kept for that purpose. being resolution which.65 The certiﬁcate by the auditor must state that: a) b) proper accounts for the ﬁnancial year have been kept. The return must be kept up to a date not earlier than fourteen days from the date of lodgement and lodged with the Registrar once in a calendar year. Annual returns An offshore company must make an annual return in a prescribed form and contain certain prescribed particulars. and no circumstances have occurred since the date on which those accounts were made up would render the company insolvent. would not have been effective unless it has been passed as a special resolution. if not agreed to. and all resolutions which effectively bind all members of any class of shareholders whether agreed to by all members of that class or not. he is unaware of circumstances which render those accounts untrue. and the director giving the certiﬁcate has been furnished with a copy of those accounts.62 Such a book must be kept at the registered ofﬁce of the offshore company but its copy may be kept elsewhere. would not have been effective unless passed by some particular majority. c) d) A copy of every resolution passed as above shall be embodied in or annexed to every copy of the articles issued after passing the resolution. that a balance sheet and proﬁt and loss account have been prepared and audited. 60 61 62 63 64 65 Section 103(1) OCA 1990 Section 103(2) OCA 1990 Section 104(1) OCA 1990 Sections 109(1). 61 25.63 If an auditor is appointed. 109(2) & 109(3) OCA 1990 Section 109(4) OCA 1990 Section 109(5) OCA 1990 18 .
(see example 2) 2) Example 1) if a company is incorporated on 5th April 2008. the date at which the name of each person was entered in the register as member. With effect from 1st July 2008. Its annual fee shall be paid not later than 30 days from its anniversary which means by 4th May 2009. Register of members Every offshore company must keep a register of its members which must contain the following: a) name. its anniversary is on 5th April 2009. LOFSA’s annual fees payable are as follows: 1) if the due date (last day to pay annual fee) falls on or before 31st July 2009. This company still pays RM2600 in 2009 but will pay RM1500 in the following years. a trust company normally asks for this payment three to four months before it is due. LOFSA’s annual fee payable is RM1500 only. For all existing Labuan offshore companies incorporated on or before 30th June 2008. Annual fee Annual fee of an offshore company is payable not later than one month from the anniversary of its incorporation. This company therefore only pays RM1500 in 2009 and thereafter. strike off proceeding may be taken against the offshore company. and a statement of the shares held by each member. LOFSA’s annual fee charged for new Labuan offshore companies incorporated on or after that date has been reduced from RM2600 to RM1500. If non-payment persists for more than a year.27. 28. the date at which any person ceased to be a member during the previous seven years and therefore ceased to be a member. distinguishing each share by its number or by the certiﬁcate number identifying the member’s holding and of the amount paid or agreed to be considered as paid on the shares of each member. address and any relevant information of each member. Its annual fee shall be paid not later than 30 days from its anniversary which means by 4th August 2009. and the date of every allotment of shares to members and the number of shares that comprised each allotment. Example 2) if a company is incorporated on 5th July 2008. nationality. b) c) d) 19 . LOFSA’s annual fee payable is RM2600 and thereafter RM1500 only. its anniversary is on 5th July 2009. In practice. (see example 1) if the due date (last day to pay annual fee) falls on or after 1st August 2009. Failure to pay the annual fee within the prescribed period will render an offshore company liable to a penalty.
The register shall be prima facie evidence of any matters inserted therein as required or authorised by the OCA 1990. perhaps limited to an offshore company that issues a large number of shares. is not invalid by reason only of the fact that the company was without capacity or power to undertake the transaction. or c) any petition by the Minister of Finance to wind it up. Ultra vires transaction A transaction purported to be done by an offshore company. signed by a director and countersigned by another director or the company secretary. Common seal There is no express provision for a common seal to be adopted.67 In practice. Such lack of capacity or power may only be relied upon under the following circumstances: a) any proceeding against the offshore company by any of its members. b) any proceedings by the company or any member of the company against the present or former ofﬁcers of the company. it is at best indirect. the use of share seal is uncommon. 30. An offshore company may also have a share seal and share certiﬁcates under such seal shall be deemed to be sealed with the common seal of the company. The register must be kept at the registered address of the company and shall be made available for inspection by members at no charge. debenture holders or trustee of debenture holders to restrain transfer of property to or by the company. 66 67 Section 86(2) (a) OCA 1990 Section OCA 1990 20 . In practice the articles of an offshore company usually provide that the seal can only be afﬁxed by authority of the board. 29.66 If this is to be construed as a requirement to have a seal. The closest to this provision is a requirement to display the name which shall be legible and in romanised letters on the company’s seal.
70 A copy of every account to be presented must be sent to all members not less than seven days before the date of the meeting.73 the company does not issue an invitation to the public to subscribe its debenture.PA R T V: A C C OU N TS A N D AUDI T 31. the company does not issue an invitation to the public to deposit or lend money to it and. Failure to keep proper accounting records is an offence under the OCA 1990.69 The records must be kept at the registered ofﬁce or elsewhere if so directed by the directors. the members of the company resolve at a meeting of members that the company need not make an appointment in respect of a particular ﬁnancial year.68 This would mean keeping accounts up to trial balance at the least. A copy of the accounts so presented must be lodged with the Registrar within one month after presentation. The records must be made available for inspection and kept in such a manner as to enable them to be conveniently and properly audited. Section 110 (1) OCA 1990 Section 110(2) OCA 1990 70 Section 111(1) OCA 1990 71 Section 113(1) OCA 1990 72 Section 113A OCA 1990 73 Section 113A (a) only makes mention of a company licensed under the Offshore Banking Act 1990 and Offshore Insurance Act 1990. the directors of an offshore company must appoint a person or persons to be the auditor or auditors of the company. An auditor must give written undertaking of non-disclosure before inspecting the records. audited or otherwise. Accounts to be presented before meeting The directors of an offshore company must lay forth the accounts. all licensed companies are required to have their accounts audited. Appointment of auditor Within ninety days after its incorporation. Appropriate entries are to be made in the accounts and other records of the company within sixty days of the completion of the transactions to which they relate. An offshore company is not required to appoint an auditor 72 under the following circumstances: a) b) c) d) it is not a licensed company. 68 69 21 . before the company at a meeting of members not more than nine months after the date the accounts are made up. a notice together with a written consent from the auditor should be lodged with the Registrar.71 Within thirty days of such appointment. Accounts and Audit An offshore company must keep proper accounts and other records which can sufﬁciently explain the ﬁnancial position and the transactions undertaken by the company. However in practice.
The bulk of the offshore companies in Labuan may come under this category and thus do not need their accounts audited. The accounts must be submitted to the Inland Revenue Board of Malaysia. management. Such election requires the offshore company to have its accounts audited and to submit the audited accounts to the Inland Revenue Board. NO if paying RM20k YES YES LOC electing ITA 1967 to be taxed under ITA 1967 26% on Advance tax domestic payable income. loans. The term “offshore non-trading activity” refers to activity relating to the holding of investments in securities. However. Yes if the accounts are presented at a meeting of members.75 The same applies to an offshore company that elects to be taxed under the ITA 1967. because the 3% rate is calculated based on the chargeable proﬁts74 of an offshore company carrying on an offshore trading activity.However. stock. it is worth repeating that an offshore company electing to pay tax at the 3% rate will need to have its accounts audited.deposits and immovable properties by an offshore company on its own behalf. Extension of time to ﬁle and pay is allowed but must be made before 30th April every year. Labuan Offshore Unit. Taxation. 0% monthly on foreign sourced income. an offshore company which carries on an offshore business activity which is an offshore non-trading activity is not required to have its accounts audited. shares. No if the accounts are not presented yet. (25% fromYA 2008/2009) YES YES NO/YES 74 75 76 77 78 79 Section 4(1) LOBATA 1990 Section 4(2) LOBATA 1990 The term “offshore trading activity” includes banking. insurance. The chargeable proﬁt of an offshore company shall be the net proﬁts as reﬂected in the audited accounts in respect of a particular year of assessment. licensing or any other activity which is not an offshore non-trading activity. NO if paying RM20k NO Filing of a/c with LOFSA? NO/YES 78 T axing Statute LOC as Trading Company76 LOBATA 1990 Tax rate 3% or RM20k LOC as non-trading Company79 LOC which is licensed LOBATA 1990 NIL N/A YES NO/YES LOBATA 1990 3% or RM20k On or before 31st May every year YES YES YES if electing to pay 3%. 22 . accounts and audits summary When tax payable? On or before 31st May every year77 Are a/c Must a/c required to be audited? be prepared? YES YES if electing to pay 3%. trading. NO if paying RM20k NO Filing of a/c with IRB? YES if electing to pay 3%.
a separation of two or more businesses carried on by an offshore company. usually expressed as a percentage of the amount paid up on the shares or nominal amount of the shares.00. provided the surviving or the consolidated company remains an offshore company. Currently. No person shall knowingly accept the appointment as an auditor of an offshore company or prepare on behalf of an offshore company any audit report unless he is an approved auditor. Arrangement & reconstructions Arrangement and constructions are covered in detail in Part VII of the OCA 1990. 33.85 Application for approval is made to LOFSA using prescribed forms.83 No person shall perform the duties of liquidator of an offshore company unless he is an approved liquidator.32. Currently the annual fee for an approved liquidator is RM200. There is no requirement that the liquidator must have a presence in Labuan. c) d) 80 81 82 83 84 85 86 87 Section 10(1) OCA 1990 Section 10(2) OCA 1990 Section 11(1) (a) OCA 1990 Section 12(1) OCA 1990 Section 12(4) (a) OCA 1990 Section 12(4) (c) OCA 1990 Section 140 OCA 1990 Section 118(1) OCA 1990 23 .82 The Registrar may approve any person to be an approved liquidator. ‘Arrangement’ means:87 a) b) a reorganisation or reconstruction of an offshore company. or the combination of any of those speciﬁed in a) to c) above.80 No person shall perform the duties of auditor of an offshore company unless he is an approved auditor. Dividends Other than a provision stating that dividends must be paid out of the proﬁts of an offshore company.84 An approved liquidator must give his consent in writing prior to his appointment as an approved liquidator for an offshore company. There is no requirement that the auditor must have a presence in Labuan. 34. An approved auditor must give his consent in writing prior to his appointment as an approved auditor for an offshore company. Therefore it is common that the company’s articles will stipulate the ways in which dividends may be declared.81 Application for approval is made to LOFSA using prescribed forms. the annual fee for an approved auditor is RM200. a merger or consolidation of one or more offshore companies with one other or more offshore companies.86 there are no other provisions governing it.00. Approved auditors & liquidators The Registrar may approve any person to be an approved auditor.
35. the articles of arrangement are required to be executed and must contain the plan. 88 89 90 91 Section 211 Companies Act 1965. Takeovers & mergers The Minister has the power to formulate regulations for the supervision and control of takeover and merger transactions. Winding up procedures90 in Companies Act 1965 are adopted in full. The directors of the offshore company shall upon conﬁrming the arrangement give notice to persons whom the Court has directed and submit the plan of arrangement to those persons for approval. The Court may: a) b) c) d) e) determine what notice. determine whether any holders of securities in the company may dissent the proposed arrangement. is to be given to any person. Winding up. conduct hearing and permit any interested persons to hear. The arrangement takes effect from the date the article is registered or on any subsequent date not more than thirty days from the date the articles are registered with the Registrar. Part VIII and Part X of the Companies Act 1965 Section 131 OCA 1990 24 . if any. strike off. and the manner in which the plan of arrangement was approved. and approve or reject the plan as proposed or approve with amendments.88 A voluntary winding up may be either by way of members’ voluntarily winding up or creditors’ voluntarily winding up. After the plan of arrangement has been approved by those persons.89 The actual winding up process must be conducted by a liquidator approved by the Registrar. determine whether approval should be obtained and the manner in which such approval is to be obtained.91 This process takes at least three months or longer. Winding up by court order is initiated by a presentation of a petition by a person entitled to do so. the directors must conﬁrm the arrangement if they wish to go ahead with the arrangement. after which the Registrar shall issue a certiﬁcate as evidence of the registration of the arrangement. the offshore company must make an application to the Court for approval of the proposed arrangement.A plan of arrangement requires approval by resolution of the directors of the offshore company or companies. The Court may make an interim or ﬁnal order and may set out conditions for the approval. the order of the Court approving the plan. For example the company itself. trustee or liquidator. The articles of arrangement must be lodged with the Registrar. Upon approval. To date no such regulations have been issued. 36. If a plan has been approved. etc An offshore company may be wound up voluntarily or by court order.
licence fees and penalties shall have priority over all other claims against the assets of the offshore company. carry on business or deal with the assets of the company except to continue proceeding that commenced prior to the strike off.92 If the company fails to pay the annual fee on or before the expiration of six months from the annual fee payment date. on the expiration of one month after the six months period the offshore company still does not pay the annual fee together with the penalty amount. the offshore company and its directors. and act in any way with respect to the affairs of the offshore company. A struck off company merely has its name removed from the Register but in law remains liable for all claims. RM750. if any.99 There is no time limit to apply for re-registration but all fees and penalties outstanding must be settled ﬁrst. An offshore company that does not wish to continue business may apply to have its name struck off from the register by making an application in writing to LOFSA. the Registrar may send a notice to the company secretary stating that the offshore company will be struck off should payment not be received within one month of the notice. debts. 93 the company is liable to pay up to ﬁfty percent of the annual fee amount.96 Offshore companies whose names have been struck off shall remain liable for all fees.00 Section 151(3) OCA 1990 Section 151(5) OCA 1990 Section 151A OCA 1990 Section 151B OCA 1990 Section 151C (2) (a) OCA 1990 25 .94 If.95 Strike off does not absolve the company from liability. 92 93 94 95 96 97 98 99 Section 151 OCA 1990 Annual fee payment date is the date which is not later than one month from the anniversary of incorporation.98 Where the name of an offshore company has been struck off. The application shall be made through a trust company and all outstanding fees and penalties must be paid prior to submitting the application. liquidators and receivers shall not: a) b) commence any legal proceedings. members. c) A company that has been struck off may apply to be registered afresh. An offshore company is required to pay an annual fee to the Registrar by the annual fee payment date. licence fees and penalties under the OCA and such fees.97 The Registrar may refuse to take any action required of him for which a fee is prescribed until all fees have been paid. liabilities and obligations and the liability of its directors and members remain. defend any legal proceedings and generally make any claims under the name of the offshore company except to defend proceedings that were commenced against the company prior to the date of strike off.Strike off due to non-payment of annual fee.
Summary Types Method Suitability Effect Benefits Winding up By approved liquidator pursuant to winding up procedure in CA 1965 Application made by trust co after paying all outstanding fees to LOFSA Company’s name being struck off by LOFSA due to non-payment of annual fee Active company with assets and liabilities Co. upon obtaining approval from the Registrar and within two months from the date the approval was given. 100 Section 133(1) OCA 1990 26 . apply for an instrument transferring the offshore company to another country as if it has been incorporated under the laws of that country. still exists even after strike off Co. officially “dead” Winding up is a clean process Application to de-register/ strike off Dormant co. the offshore company shall be become a company under the laws of that country and be domiciled there. Redomiciliation An offshore company may. may be re-instated by paying back-dated fees and penalties 37.100 Companies registered in other offshore jurisdictions can similarly be re-domiciled in Labuan. may be re-instated Strike off due to non-payment of annual fee N/A Not clean but co. On the date of the instrument of transfer. Co.
trading. Further. Permitted investments in domestic companies in Malaysian currency are now included in the deﬁnition of “offshore business activity”. offshore companies that have been approved to invest in domestic Malaysian companies are allowed to hold the investments in Malaysian Ringgit. petroleum operations are now regarded as offshore business activities. the deﬁnition of “offshore business activity” has been extended to cover income from transactions with Malaysian residents through money broking and offshore leasing activities. Further. An offshore company carrying on an offshore business activity shall be charged to tax in accordance with the provision of LOBATA 1990 for each year of assessment.PA R T VI : TA X ATION 38. licensing or any other activity which is not an offshore non-trading activity.104 With effect from the year of assessment 1996. loans. management. stock.103 The term “offshore trading activity” includes banking. 101 102 103 104 Section 3 LOBATA 1990 Section 2 LOBATA 1990 Section 2 LOBATA 1990 Section 2 LOBATA 1990 27 . The change is aimed at attracting oil exploration companies to use Labuan as a base for their regional oil exploration and other activities. Taxation of an offshore company Taxation of a Labuan offshore company is governed by the Labuan Offshore Business Activity Tax Act 1990 or LOBATA 1990. other activities that involve the carrying on of activities with Malaysian residents or in Malaysian currency would now be subject to approval by the Minister of Finance. Such holding does not amount to dealing with Malaysian residents. With effect from the year of assessment 1999. shares. So too charter of ships on a “bare boat” basis will now qualify as an “offshore business activity”.101 “Offshore business activity “means an “offshore trading” or an “offshore nontrading” activity carried on in or from Labuan in the currency other than Ringgit by an offshore company with non-residents or with another offshore company but does not include shipping operation. deposits and immovable properties by an offshore company on its own behalf. insurance.102 The term “offshore non-trading activity” refers to activity such as the holding of investments in securities.
the offshore company must ﬁle a statutory declaration in the prescribed form. this offshore company can elect to be assessed at a ﬁxed rate of RM20. Section 4 LOBATA 1990 Section 7 LOBATA 1990 Section 8(1) LOBATA 1990 Section 9 LOBATA 1990 Section 10 LOBATA 1990 Section 8A LOBATA 1990 Section 16 LOBATA 1990 28 .If an offshore company carries on an offshore trading activity. Where an offshore company carries on both an offshore trading activity and an offshore non-trading activity.000 and ﬁle a statutory declaration within three months from the commencement of the year of assessment. Any income derived by an offshore company from an activity which is not an offshore business activity will continue to be subject to the Income Tax Act 1967. Election to pay RM20. the IRB has allowed extension and the ﬁling is now made on or before 31st of May every year.000 is chosen there is no need to ﬁle audited accounts.106 Alternatively. However.000 can be made within 3 months from commencement of year of assessment. An offshore company carrying on offshore business activities that does not have an accounting period for a year of assessment will have to pay RM20.000 for a year of assessment. tax at the rate of 3% is imposed upon its chargeable proﬁts105 for the year of assessment.107 When making an election. it will be deemed to be carrying on an offshore trading activity. Where the ﬂat rate of RM20. Thus the offshore company is liable to pay tax at the rate of 3% of its audited net proﬁt or elect to pay RM20. Further extensions may be applied for on or before 30th April every year.111 The responsibility of tax compliance done by or on behalf of an offshore company lies jointly and severally with the manager. However the company should still maintain adequate ﬁnancial records. principal ofﬁcer and resident director of an offshore company. When exercising an election.109 Such an offshore company is still required to ﬁle a statutory declaration in the prescribed form.110 An offshore company carrying on an offshore trading activity must ﬁle a statutory declaration and return of proﬁt within three months from the commencement of a year of assessment.108 An offshore company carrying on offshore non-trading activity pays no tax. Tax rebate is granted to an offshore company for any zakat which is paid in the basis period for that year of assessment. the offshore company will have to ﬁle statutory declaration in the prescribed form.112 105 106 107 108 109 110 111 112 Chargeable proﬁts are based on the audited net proﬁts as declared in the return of proﬁts ﬁled by the offshore company.000.
ﬁle an estimate of tax payable. The election must be irrevocable. commencing from the 2nd month of the basis period for the year of assessment of which an estimate has been furnished. Not only is the income of the Labuan offshore company tax exempt. make payments by installment on a monthly basis. if any. An offshore company may make an irrevocable election in the prescribed Form 8 and submit the form to the following: Inland Revenue Board of Malaysia Labuan Branch Unit E. The LOBATA imposes tax on a preceding year basis. dividends from the Labuan offshore company received by the shareholders of the Labuan offshore company are also exempted from tax. an offshore company is required to: i. pay their ﬁnal tax liability by the 7th month from the date following the close of the company’s accounting period. keep documents for ascertaining chargeable income and tax payable.Election to be taxed under the Income Tax Act With effect from the year of assessment 2008. Amongst others. 29 . this income when remitted to Labuan/Malaysia will be exempted from Malaysian Income Tax. Podium Level Kompleks Ujana Kewangan Jalan Merdeka 87000 Wilayah Persekutuan Labuan Compliance requirement Upon election. Therefore. by completing Form CP204 and furnish it to the DGIR not later than 30 days before the beginning of the basis period for that year of assessment. this should enable the Labuan offshore company to access and beneﬁt from all the Double Tax Treaties that Malaysia has signed with its 60 plus treaty partners. Since all the income of the Labuan offshore company is foreign sourced. the election may be made and furnished before 1st August 2008. ii. the accounting period for which the election is made may refer to a different year of assessment under those Acts. iv. an offshore company is required to comply with the provisions under the ITA 1967 in the year of assessment in which the election was made and for the subsequent years of assessment. iii.005 1st Floor.004 & E. At least in theory. Tax is to be paid under the ITA 1967 at the prevailing tax rate and the Labuan offshore company will be governed by all the provisions therein. a Labuan offshore company may now elect to be taxed under the ITA 1967. and v. The ITA 1967 on the other hand imposes tax on a current year basis. Election procedure The election must be made and furnished to the Director General of Inland Revenue [DGIR] within three (3) months after the start of the basis period for a year of assessment. For an offshore company where its basis period ends on a day in the Year of Assessment 2008. The election shall be effective for that basis period for a year of assessment (for which the election was made) and subsequent basis periods. subject to tax audit.
These are as follows: a) b) c) Memorandum & Articles of Association. Other than the above. paid all taxes due and have kept its accounting and ﬁnancial records in good order. a) expatriate or non-citizen employed in Labuan in a managerial capacity enjoys 50% abatement on his employment income. it is also considered vital for the application that the particular Labuan company has ﬁled tax returns. Minutes of directors’ meeting indicating where meetings are held and what decisions in relation to “management & control” were taken. there are many others that recognise these companies. 30 . As recently as mid 2008. and Photocopies of the director’s travel documents showing his entry into and exit from Malaysia. However the following incentives apply. The Inland Revenue Board reserves the right to request further information or documents. Application for tax resident status Whilst it is possible for a Labuan offshore company to apply for tax resident status from the Inland Revenue Board. The status is given for one year of assessment only. Such abatement is available for each year of assessment from 1998 to 2010. may offer the beneﬁts of Malaysia’s numerous double tax treaties. The Inland Revenue Board has issued a list as to the documents or information required for the application. Double taxation relief Labuan is part of Malaysia and thus. b) c) d) 41. Thereafter. 50% of the housing and regional allowances for residents working in offshore companies in Labuan will be exempted from tax for the year of assessment 1998 to the year of assessment 2010. and. largely because they are themselves eager for inward investment. a new application is required if tax resident status is required in subsequent years of assessment. 40. 50% of the gross income of a non-resident manager working for a Labuan trust company is exempted from tax from the year of assessment 1998 to the year of assessment 2010. Personal taxes Individuals employed by a Labuan Company are liable to personal income tax as prescribed by the ITA 1976. Asian countries on the whole have accepted Labuan offshore companies as being entitled to the beneﬁts of Malaysia’s double tax treaties with them. the grant is not as of right but dealt with on a case by case basis.39. the new measure introduced that allowed Labuan offshore companies to elect to be taxed under the ITA 1967 should arguably enable more recognition of Labuan offshore companies by Malaysia’s treaty partners. Whilst some treaty partners from high tax countries had declined to recognise Labuan offshore companies as being entitled to beneﬁt under Malaysia’s tax treaties with them. income from fees received by any non-citizen in his capacity as a director of an offshore company for the year of assessment 2002 to the year of assessment 2010 wil be exempted from income tax.
carries. disguises or impedes the establishment of the true nature. exchanges. the person without reasonable excuse fails to take reasonable steps to ascertain whether or not the property are proceeds from any unlawful activity. b) acquires. Inclusion of anti-terrorism ﬁnancing came in 2003. investigation.42. Foreign serious offence means an offence certiﬁed to be an offence against a foreign state and that offence if committed in Malaysia would have been a serious offence. What amounts to money laundering acts? Under the AML/ATF Act money laundering acts can be broken down into the following: The act of any person who a) engages directly or indirectly in a transaction that involves proceeds of an unlawful activity. seizure and forfeiture of assets by enforcement agencies. movement. disposes. or conceals. 3. proceeds of unlawful activities. The provisions of the AML/ATF Act cover the following: 1. the Act was called Anti-Money Laundering Act 2001. location. or in respect of the conduct of a natural person. any serious offence. a piece of legislation which made it a crime to launder money and ﬁnance terrorism. possesses. In addition there are provisions governing the establishment and powers of competent authority. Unlawful activity is deﬁned as “any activity which is related. 2. freezing. origin. disguises. where –– c) as may be inferred from an objective factual circumstance. receives. disposition. reporting. any person natural or artiﬁcial. uses. directly or indirectly to any serious offence or any foreign serious offence. the person knows or has reason to believe that the property are proceeds from any unlawful activity. report keeping. and any property whether situated in or outside of Malaysia. customer identiﬁcation and training by “reporting institutions”. rights with respect to. title of. foreign serious offence or unlawful activity whether committed before or after its commencement. removes from or brings into Malaysia proceeds of any unlawful activity. transfers. converts. or ownership of.” 113 When ﬁrst passed. one of the most signiﬁcant developments in Labuan was the passing of the Anti-Money Laundering & Anti-Terrorism Financing Act 2001113 or AML/ATF Act. 31 . Anti-money laundering law In 2001. The AML/ATF Act came into effect on 1st October 2001.
etc. Terrorism ﬁnancing offences are. time and amount. banks. The Financial Intelligent Unit (FUI) of the Bank Negara 32 . types of transaction. This deﬁnition is wide enough to cover all companies in Labuan whether licensed or otherwise.116 arranging for retention or control of terrorist property. a) b) c) d) providing or collecting property for terrorist acts. Retention of records. date.115 providing services for terrorist purposes. Identiﬁcation procedures. and compliance programme Record-keeping There is an obligation on the part of the reporting institution to keep records of any transaction involving either Malaysian or other currency where the transaction exceeds a certain amount to be prescribed by the Competent Authority. insurers.114 The punishment for money laundering offences under AML/ATF Act is very severe. 5. 114 115 116 117 118 119 120 Section 4 AML/ATF Act Section 130N of the Penal Code Section 130O of the Penal Code Section 130P of the Penal Code Section 130Q of the Penal Code For the purpose of Labuan “reporting institution” the term means any person who carries on “offshore ﬁnancial services”. 2. In particular reporting institutions in Labuan are imposed with the following obligations: 1. 4.Money laundering offences Any person who engages in. Conviction carries a ﬁne not exceeding ﬁve million in Malaysian Ringgit or to imprisonment not exceeding ﬁve years. or attempts to engage in or abets the commission of money laundering shall be guilty of an offence. 3. Reporting.117 and dealing with terrorist property 118 AML/ATF Act imposes strict obligations on reporting institutions119 in Labuan in combating money laundering and terrorism ﬁnancing. There are many other lesser degrees of offences like opening an account using a ﬁctitious name or failure to keep records within the prescribed time limit. Record keeping .120 Among the particulars to be recorded are identity and address of customer. fund managers. But it is submitted that “reporting institution” should be conﬁned to licensed companies like trust companies. identity of accounts.
while the AML/ATF Act overrides all secrecy provisions in the prevailing legislation. Secrecy provisions Except in the case of criminal proceedings. the identity of the customer. Compliance programme A reporting institution is required to develop and implement internal programmes that can detect and forestall money laundering and terrorism ﬁnancing. While the provisions of the AML/ATF Act are far-reaching. the attraction of Labuan as an offshore centre would still be the top priority. For example. birth certiﬁcate or any other ofﬁcial or private documents. normally by a judge in a private ofﬁce and not in open court. The programmes must include: 1) 2) 3) Procedure to ensure high standard of integrity of its employees. This is justiﬁed as reporting of suspicious transaction is one of the fundamental requirements of the AML/ATF Act. by reliable means. This can be veriﬁed through the identity card. Section 149(1) OCA 1990 33 . the attractiveness of Labuan to genuine investors should not be compromised. 121 122 Proceeding held in camera means proceeding held in a closed door session. books and registers of the company and the entries in the Registrar’s register be open to the public for inspection. These programmes must also be implemented in its branches or subsidiaries outside Malaysia.122 In a proceeding for winding up of an offshore company.Reporting obligation A reporting institution must promptly report to the Competent Authority any transaction exceeding an amount speciﬁed AND where the identity of the person involved. On going employee training such as “know your customer” programme. all proceedings relating to an offshore company shall be heard in camera121 and no details shall be published by any person without leave of the Court. Not only are they required to obtain and record information about the true identity of the customers. 43. reporting is to be made to the Competent Authority. passport. they are also required to verify. Under the Act. Identiﬁcation procedure Reporting institutions are prohibited from opening ﬁctitious accounts. the transaction itself or any other circumstances concerning the transaction give rise to suspicion that the transaction involves proceeds of unlawful activity. Such order may be made if the Court is satisﬁed that the company or its ofﬁcer has failed to comply with any provision of the OCA 1990. Independent audit function to check compliance with programme Effect of the implementation of the Act on Labuan institutions Though LOFSA is committed to combating money laundering and terrorism ﬁnancing. the Court may order that the records. the overriding is only in so far as there is suspicion that a transaction involves proceeds from a criminal activity. Such a disclosure order can also be made by the Court if an offshore company or any of its ofﬁcers is convicted by the Court of an offence under the OCA 1990.
Exchange control Labuan offshore companies enjoy dual residencies namely. open any Ringgit account except for defraying administrative and statutory expenses. and any of the business. other than extension of Ringgit credit facilities to their staff. This is very unique and the nonresident status enables a Labuan company to open foreign currency accounts with any banks and may remit and receive foreign currencies liberally. a request is sent by the Registrar to Bank Negara Malaysia for a declaration of nonresident status. Normally this declaration is obtained within 2-3 weeks after incorporation. ﬁnancial or other affairs or transactions of the company. divulge. attempt or threaten to divulge and induce or attempt to induce another person to divulge any information concerning or touching upon the following in relation to an offshore company. in Labuan or elsewhere. extend or raise any credit facility in Ringgit on behalf of resident or non-resident. 34 . borrow. or deal in the currency of Israel without the permission of the Controller of Foreign Exchange. lend or sell foreign currency from an authorised dealer. b) c) An offshore company is not permitted to. As soon as an offshore company is registered. subject to the requirement that the External Account is to be funded by receipt from resident arising from the sale of foreign currencies or proceeds of credit facilities in RM as permitted in ECM6. open one or more foreign currency accounts in and outside of Malaysia. a) b) c) d) accept deposits in Ringgit from any resident or non-resident.No person shall. and shall not undertake any transaction with the residents of. and obtain credit facilities in Ringgit from any resident other than permitted in ECM 6. a licensed offshore bank or any non-resident. 44. the management of such company. Pursuant to the declaration. buy. This declaration states that a particular offshore company is a non-resident for foreign exchange administration purpose subject to the conditions that the company: a) b) complies with the provisions stipulated in the Exchange Control Notice ECM 15 pertaining to Labuan International Business and Financial Centre. the Controller gives permission to an offshore company to: a) open one or more external accounts in Malaysia solely for the purpose of defraying its administrative and statutory expenses including granting of loan to staff. for which he shall be guilty of an offence: a) b) c) the shareholding in or beneﬁcial ownership of any shares in such company. a Tier-1 merchant bank. as a resident for tax purpose and a non-resident for the Malaysian Exchange Control purpose.
The expatriates are responsible for implementing the company’s policies and supervision of staff. Chief Executive Ofﬁcer. The posts require academic qualiﬁcations. Examples of posts under this category are Executive Chairman. Technical Director.PART VII: EXPATRIATE EMPLOYMENT. The expatriates employed under this category are generally responsible for determining the companies’ policies. These posts are essential for foreign owned companies to safeguard their business interests in Malaysia. managerial and professional posts. Architect. Heat Setting Technician. SC or Securities Commission. MDec or Multimedia Development Corporation. Expatriate Employment in Labuan IBFC Expatriate employment in Malaysia falls under the following categories: Key post: This is for high level managerial post in foreign-owned private companies and ﬁrms operating in Malaysia. Application for work permit can be submitted to any Immigration Ofﬁce in Malaysia. application for approval of work permits from the Immigration Department of Malaysia. General Manager. Country Manager or Factory Manager. Tool & Die Maker. Examples of posts under this category are Welder. the above posts are in respect of expatriate employment in foreign-owned private companies and ﬁrms operating in Malaysia. CBM or Central Bank of Malaysia. Engineer Manager. operation headquarters and representative ofﬁces. Managing Director. In most cases the entities involved in providing employment are the local Sdn Bhd companies. public institutions. etc. Professionals such as Chief Engineer. Invariably the entities under which the expatriates are employed have business dealings with Malaysian residents. practical experience. Lecturer. and Specialist in Furniture Design. As stated earlier. Logistics Manager. government bodies. 35 . Non-executive posts: These are posts for the performance of technical jobs that require speciﬁc technical or practical skills. Examples of posts under this category are Marketing Manager. Doctor. To employ an expatriate under any one of the above categories the following processes apply: 1) application for approval of position from six authorised agencies such as: a) b) c) d) e) f) 2) MIDA or Malaysian Industrial Development Authority. PSD or Public Service Department. INCENTIVES AND GUIDELINES 45. and EC or Expatriate Committee. skills and expertise related to the respective jobs. Sewing Specialist. The bulk of the applications for approval goes to the EC or Expatriate Committee. Manufacturing System Designer. Fashion Designer. and Craftsmen. Executive posts: This is an intermediate level. local ﬁrms. Project Manager. Food/Nutrient Technologist. goals and objectives. Quality Control Manager. Mould Maker. Production Manager.
etc. If his application is approved. Once a recommendation has been made by LOFSA. This application can only be made for a Labuan offshore company that conducts “offshore business activities” which include consulting. It is very important that the applicant’s passport and his dependents’ passports have at least two and a half years’ validity at the time the application is made. the Labuan offshore company is prohibited from dealing with Malaysian residents. management. done with foreign parties. and once the work permit is approved. the employment is strictly under a Labuan offshore company established under the Offshore Companies Act 1990. LOFSA will issue a letter to the Immigration Department in Labuan recommending that a 2-year work permit and dependent passes be issued to him and his dependents. the application for approval of work permit can only be made to the Department of Immigration’s Ofﬁce in Labuan. He is not permitted to use the Labuan offshore company to conduct business with residents of Malaysia. the applicant and his dependents must travel to Labuan to have their passports endorsed with the work permit and dependent passes. trading. If a person is a director or ofﬁcer or shareholder or employee of a Labuan company he can apply for his work permit himself and dependent passes for his dependents. this can be done in one day.Labuan IBFC Expatriate Posts: Expatriate employment under Labuan IBFC however is different and unique in that: 1) 2) 3) 4) 5) application for approval of position is not made to any of the six authorised agencies. the expatriate must come personally to the Immigration Department’s Ofﬁce in Labuan. but to the Labuan Offshore Financial Services Authority. Once his Labuan offshore company has been incorporated. the Immigration Department will approve a work permit or dependent pass within fourteen days. Take note that the above time frames assume that the applicant has provided the trust company with full payment and complete documentation. application for approval of his position can be made to LOFSA. Normally work permits and dependent passes are given for 2 years although it is possible to apply for longer periods to a maximum of 5 years. 36 . In most cases. It takes two to three days to incorporate a Labuan offshore company. Applying for work permit & dependent passes The ﬁrst step an applicant needs to do is to establish an offshore company in Labuan. He may be the director of the Labuan offshore company and at the same time. There are many ﬂights to Labuan daily and the travel time is only two and a half hours from Kuala Lumpur. The duration to obtain a work permit is fairly short. the rest is a formality. LOFSA normally takes a week to approve a position and thereafter. On the Immigration Department in Labuan’s approval. employed by the Labuan offshore company.
clear copy of passport of the applicant (only pages which have been stamped).Major beneﬁts of a Labuan IBFC work permit 1) For carrying on offshore business activity. ii. If using a local Sdn Bhd company. vii. is US$1. rentals and the like. directors. payable next year whereas a local Sdn Bhd pays tax in advance. Dependent pass i. v. tax for an offshore company is payable on the preceding year basis. and if available. a Labuan offshore company is subjected to only 3% tax on its chargeable net proﬁt or RM20. clear copy of the passport of spouse and/or children.00 and acceptance of the employment. curriculum vitae. 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) Major prohibitions > > No business dealings with Malaysian residents. i. iv. But Ringgit account can be opened to pay expenses like salary.e. monthly salary of no less than RM3000. viii. in most cases. What is required for the work permit and dependent pass? Work permit i. The minimum paid up required.00 only. iv.000 which ever is elected for. etc Identity Card can be applied for immediately after the work permit is issued. iii. marriage certiﬁcate and/or birth certiﬁcate of children. An expatriate enjoys 50% tax abatement from the salary received. four copies of passport sized photographs. There is no need for local partners or local directors. and a letter from the work permit applicant requesting dependent pass. vi. four copies of passport sized photographs of spouse and/or children. ii. It is not required to have residence in Labuan. A work permit for a minimum of two years and maximum of ﬁve years may be obtained. for example selling goods and services to Malaysian residents. income tax number of the applicant. 37 . letter from the Labuan offshore company on its letterhead addressed to the Immigration Department to apply for the permit and /or passes. Only one director and one shareholder is required and they can be the same person and of any nationality. Not allowed to trade in the local currency Ringgit. iii. academic qualiﬁcations company proﬁle contract of employment stating at least designation. RM account can be opened to pay for expenses. Director’s fee are exempted from tax The Labuan offshore company may buy property in Malaysia which can either be residential or business use for its employees. the tax rate is 26%.
account with Internet access. In addition the offshore banks are not by nature retail banks so opening bank accounts is not its main activity. low initial deposit of around US$5.Fees payable to Immigration: i) ii) iii) main applicant pays RM300.00 for one year plus RM50 processing fee. If an applicant requires an entry visa. notary public and lawyer. and unlike offshore banks. Ringgit account can be opened where Ringgit can be used to meet expenses. corporate credit cards can be obtained. Generally a Labuan offshore company can open bank accounts with the following. Among the reasons are: i.000 for offshore banks. in Malaysia or abroad.123 Thus it can open foreign currency accounts with any banks. 123 This status is granted to an offshore company by Bank Negara Malaysia a few weeks after its incorporation and after it has submitted prescribed documents to Bank Negara Malaysia 38 . 1) 2) 3) 4) offshore banks in Labuan (foreign currency accounts only) branch of a domestic bank in Labuan (foreign currency accounts and Ringgit account) branch of a domestic bank in Kuala Lumpur or other cities in Malaysia (foreign currency accounts and Ringgit account) any banks anywhere in the world (foreign currency accounts only) It is common for Labuan offshore companies to open accounts with a branch of a domestic company in Labuan. a branch of a domestic bank has retail outlets which is more convenient. dependent pays RM90.00 for one year plus RM50 processing fee journey performed fee. However. Often the minimum initial deposit is high and the lack of internet banking is a limiting factor. Nationals from some countries may have to leave Malaysia and get their visa from the nearest Malaysian Embassy. However this can be avoided by paying “journey performed” fee of RM500. iv. Offshore bank accounts A Labuan offshore company is granted the status of a Malaysian non-resident for Malaysia Exchange Control purpose. if required is RM500. It is also quite common for Labuan companies to open bank accounts with offshore banks in Labuan. he needs to state a Malaysian Embassy where he will apply for the visa. whilst there are more than ﬁfty offshore banks in Labuan. iii.000 as opposed to at least US$25.00. 46.00 Veriﬁcation of supporting documents Supporting documents which are in foreign languages other than English have to be translated and authenticated by the applicant’s own embassy. ii. not all facilitate the opening of bank accounts. Educational certiﬁcate may be certiﬁed by an ofﬁcer from an embassy. v. ofﬁcer from a trust company. Marriage certiﬁcate MUST be certiﬁed by the Embassy only.
countries in which funds are transferred to. signatories. c. These include company/product brochure. print-out of website. passport copies veriﬁed by a bank ofﬁcer. j. curriculum vitae or resume of all directors. the nature of its business. The number of Labuan offshore companies that have opened bank accounts with domestic banks in Kuala Lumpur or other cities in Malaysia is not signiﬁcant and if they do open an account. invoice. h. anticipated annual gross sales. d. this is not a common occurrence. expected sales level. This has nothing to do with law or policy but rather the lack of understanding on the part of the local banks regarding structure and the compliance aspect of an offshore company. 39 . Kuala Lumpur. The requirements when opening a bank account vary from one bank to another. budget. evidence of business and purpose of account should be provided to the bank. the offshore company’s proﬁle which can shed light on the company. what currency the bank account is to be in the name of the authorised signatories and the mode of signing.While a Labuan offshore company may open a bank account with any bank anywhere in the world. but generally banks will require the following information and documents from applicants: a. say. this is based on the strength of a client’s existing relationship with a bank overseas. f. list of counter-parties i. etc. g. ﬁnancial statements. e. Most likely. to nature of business stating company proﬁle or write-up of the company business. it is largely due to the strength of a client’s existing relationship. sources of funds. a) certiﬁed true copies of Form 7 Certiﬁcate of Incorporation b) certiﬁed true copies of Form 14 Return of Allotment of shares c) certiﬁed true copies of Form 20 Notice on Situation of Registered Ofﬁce d) certiﬁed true copies of Form 22 Particular of Directors and Ofﬁcers e) certiﬁed true copies of Memorandum & Articles of Association f) Letter of Information from LOFSA or Letter of Good Standing Note that opening an offshore bank account is rather cumbersome now. The following are the most common corporate documents to be submitted by an offshore company. Many local bankers may hesitate which can delay or sometimes frustrate an applicant. shareholders and beneﬁcial owners countries from which the remittances are expected. However whichever bank is chosen. It is not very common for an offshore company to operate a bank account with a branch of a domestic bank in. the trust company should be able to guide the applicant and make known exactly what information and documents are required. b. catalogue. residential address and proof of residence which is normally in the form of recent bank or credit card statement or utility bill.
i. Offshore investment banking iii. Development ﬁnance business vii. Exemptions & Incentives Other incentives for Labuan. Money broking Under the Offshore Company Act a) Company management business Under the Offshore Insurance Act a) Captive insurance b) Life. general and composite insurance c) offshore reinsurance d) insurance manager e) underwriting manager f) insurance broker Under the Labuan Offshore Securities Industry Act a) Fund management b) Mutual fund c) Trustee for mutual fund d) Administrator of mutual fund e) Custodian of mutual fund Under Labuan Trust Companies Act a) Trust company 48. Credit token business vi. the Malaysian Government has granted incentives in the form of tax and stamp duty exemptions or fee reduction for individuals and companies carrying out business activities in Labuan. Islamic banking business iv. Factoring business ix. Leasing business viii. Offshore banking business ii. 40 .47. Building credit business v. Licensed or regulated business in Labuan IBFC The following are the types of businesses that require licences and/or regulated in Labuan IBFC: Under the Offshore Banking Act 1990. To promote Labuan as an international ﬁnancial centre.
Stamp duty exemption All instruments which are executed by an offshore company in connection with an offshore business activity shall be exempted from stamp duty previously chargeable under the Stamp Act 1949. 50% of the gross income of a non-resident manager working for a Labuan trust company is exempted from tax from the year of assessment 1998 to the year of assessment 2010. Tax exemption for non-residents With effect from the year of assessment 1998 to the year of assessment 2010. Tax-exempt receipts The following receipts are exempt from income tax. 50% tax abatement for foreign managers 50% tax abatement on income earned by non-citizens employed in managerial capacity in Labuan has been extended to the year of assessment 2010. iii. credited or distributed out of income derived from an offshore business activity or income exempt from tax. i. In addition. 1(1A) Service Tax Act 1975 41 . Service tax Service tax does not apply to Labuan. “Professional services” mean legal. This abatement is granted for each year of assessment up to year of assessment 2010. 65% tax abatement is granted on income derived from the provision of professional services in Labuan to an offshore company. ﬁnancial or secretarial services including the services provided by a trust company.124 Therefore service providers like trust companies. accounting. dividends received from an offshore company which are paid. a non-resident is exempted from tax in respect of income from the use of any moveable property by an offshore company licensed under the Offshore Banking Act 1990 or approved by LOFSA to carry out leasing business in Labuan. 124 Section 1(1). distributions received from an offshore trust by the beneﬁciaries. ii. any income from fees received by a non-citizen individual in his capacity as a director of an offshore company will be exempted from income tax. 65% abatement for professional services Income With effect from the year of assessment 1997. Further. Malaysian residents working in the public sector and offshore companies in Labuan enjoy 50% exemption on housing and regional allowance. dividends received by an offshore company. lawyers and accountants do not have to collect and account for service tax. Tax exemption for expatriate directors With effect from the year of assessment 2002 to the year of assessment 2010.
000 capital fee to LOFSA.000 capital fee to LOFSA.00) Nil 3% or app. Summary of Labuan offshore company main features & beneﬁts LABUAN CORPORATE DATA SHEET-SUMMARY Type of company Common or civil law jurisdictions Shelf company availability Time to incorporate Min.000 and below pays a one time RM1.49.000) for trading co. Disclosure of beneﬁcial ownership Bearer shares Standard minimum paid up capital Standard authorised share capital Permitted currency of capital Minimum number of shareholders Minimum numbers of directors Corporate directors Local directors Company secretary Company seal Public record of directors Public record of shareholders Location of directors meeting Location of shareholders meeting Telephone board meeting Double taxation treaty access Requirement to ﬁle accounts Requirement to prepare accounts Requirement to ﬁle annual returns Change in domicile Local registered address No No US$1 Approximately US$14.000 125 Any currency except local currency RM One One Yes No Yes Yes No No Anywhere Anywhere Yes Yes Trading co paying 3% Yes/Non-trading No Yes Yes Yes Yes 125 Company with authorised capital of RM50.000 capital fee to LOFSA. annual duty or franchise fee Annual return ﬁlling fee Taxation Offshore Trading or Offshore Non-trading Common No 2-3 days approximately App. US$6000 (RM20. and Company with authorised capital above RM1million pays a one time RM5.000 but below RM1million pays a one time RM2. LOC can now elect to be taxed under ITA 1967 and pay local rate of 26% in order to access all of Malaysia’s DTAs. Company with authorised capital of above RM50. 42 . & zero tax for non-trading co. US$450 (RM1500.
Good. custody and inheritance. Among the few countries that have excluded Labuan from the country’s DTA network are Japan. Initial deposit ranges from US$5. being 3% or RM20.my 43 . A Labuan offshore company is now allowed to elect to be taxed under the ITA 1967 and pay higher domestic tax rate Malaysia has signed 68 DTAs with its business partners and Labuan being part of Malaysia enjoys access to most of them. LOFSA is also a member of various international regulatory bodies. Seychelles or Bahamas. Same time zone with major Asian capitals Labuan is part of Malaysia which is a major trading nation Regulator Location Exchange control Rate of tax Double tax treaty access Local banking services Time zone Reputation 50. the UK and Switzerland. not all of them take deposits.000 whichever is elected. and Islamic ﬁnancial business.000. trust companies.lofsa. LOFSA has issued numerous business and regulatory guidelines covering matters pertaining to business activities and conduct of offshore business activities. Notably the most important are guidelines on offshore banking. Connections to Peninsular Malaysia by twice daily ﬂights ex Kuala Lumpur. Business and Regulatory Guidelines Since its inception in 1990.LABUAN IBFC-COST AND BENEFIT ANALYSIS Star Rating Corporate registration efﬁciency Availability of name Conﬁdentiality Political stability Maintenance cost Legal system Very efﬁcient. Based on English legal system. Since independence in 1957 Malaysia has enjoyed continued political stability Higher by comparison to IBC jurisdictions like BVI.000 to US$500. fund management. insurance. Name search takes 1-2 hours only and name reservation within one day. Excellent. Excellent. offshore investment banking. All these guidelines can be downloaded from LOFSA’s website www. leasing.gov. Although there are more than 50 offshore banks in Labuan. company management. Islamic laws apply to Muslims only in matters involving marriage. Brunei. Company can be incorporated in 1 to 2 days Names are easily available. Availability of internet banking is limited. Located off the coast of Sabah in East Malaysia (which is on the island of Borneo). Very liberal Very favourable. Unauthorised disclosure of client’s information is subject to penalty. LOFSA is under the Central Bank and is an excellent regulator.
Is a Labuan offshore company considered as non-resident for Malaysia Exchange Control? Yes. Does the recent BNM guarantee on deposits cover deposits with offshore banks in Labuan? Yes. Is the use of bearer shares allowed in Labuan? No. that a company is in good legal standing in that it is duly incorporated. The search may be performed by anyone if written authorisation for the search is given by the director of a Labuan offshore company. under the domestic registry. LOFSA submits to Bank Negara Malaysia the list of newly incorporated offshore companies together with relevant forms. Such election however is irrevocable and allows the offshore company to enjoy the beneﬁts of Malaysia’s double taxation treaties with 68 countries. Offshore banks incorporated in Labuan are thus covered by the guarantee. Can a company search be done on a Labuan offshore company? Yes. still on the register. Upon approval BNM will issue a declaration of nonresident status for each company to LOFSA who will then forward the declaration letters to the respective trust companies. the name “Puteri” is gazetted for restricted use. To date there are more than 6500 companies registered in Labuan so there is no problem with choice of names. On a weekly basis. For example. consolidation or reconstruction. The guarantee covers all Ringgit and foreign currency deposits with domestic and locally incorporated foreign banking institutions. This declaration is normally obtained within 2-3 weeks after incorporation. 44 . This letter is normally requested by a bank when an account is to be opened for an offshore company. is not in the process of winding up. a Labuan offshore company may now elect to be taxed under the Income Tax Act 1967. and subject to Ministerial approval. What is Letter of Good Standing? A letter issued by LOFSA conﬁrming among others. but company search is basic. is not in the process of merger. being a resident of Malaysia for tax purpose and non-resident of Malaysia for Malaysia Exchange Control purpose. In addition LOFSA as the Registrar is not subjected to the Government’s gazette restricting the use of certain names. Bank Negara Malaysia has issued a guarantee for all bank deposits held with banks in Malaysia. A Labuan offshore company enjoys dual residency status. re-domiciliation or ceasing business and no proceeding is being brought to strike it off from the register.51. Frequently asked questions. This is not the case in Labuan where the name “Puteri” may be used. Are names easily available? Yes. Can an offshore company elect to be taxed under the Income Tax Act 1967? Yes.
What is a bare trust? This is the most basic form of trust which is commonly used in company management business where shares in an offshore company are held by a trust company in its capacity as nominee or ‘bare trustee’ for the actual beneﬁcial owner. ofﬁcers. shareholders. etc. What is an apostille? This is a method of certifying a document for use in another country pursuant to the 1961 Hague Convention on Legalisation of Foreign Documents. What is certiﬁcate of indemnity? This basic document is commonly used in company management where a beneﬁcial owner indemniﬁes a nominee director from all risks. Is the use of nominee director allowed? Yes and this is very common. 45 . Is the use of nominee shareholder allowed? Yes and this is very common. The certiﬁcate normally gives details of shareholders. This letter is normally used when opening bank accounts. With this certiﬁcation by apostille. a document is entitled to recognition in the country of intended use. the details of the directors. This avoids the use of expensive and lengthy back-to-back legalisation but only available in a country which is a signatory to or has ratiﬁed the Convention. The letter also conﬁrms that the company continues to exist and there is no legal administration process with regards to winding-up or dissolution of the company which has been brought to LOFSA’s attention. among others. damages or liability incurred by the nominee arising from the exercise of his function as nominee director for and on behalf of the beneﬁcial owner. This works as an added layer of conﬁdentiality to a beneﬁcial owner where his name will not appear in the shareholder’s register save for the bare trust. This works as an added layer of conﬁdentiality to a beneﬁcial owner whose name will not appear in the director’s register save for the certiﬁcate of indemnity. directors. What is certiﬁcate of incumbency? A certiﬁcate of incumbency is normally issued by a company secretary or a registered agent and not the Registrar. This certiﬁcate is rarely used for the opening of bank accounts but to conﬁrm basic company details to business counter-parties.What is Letter of Information? A letter of information is one issued by LOFSA conﬁrming. and does not require certiﬁcation or legalization by the embassy or consulate of the foreign country where the document is to be used. ofﬁcers and nature of business of a Labuan offshore company. The alternative to this letter is the letter of good standing although the letter of good standing is worded in a more general way.
4) Form 22-Particulars of Directors & Ofﬁcers. The copy is next brought to the British High Commission in Kuala Lumpur where an ofﬁcer conﬁrms the signature of the Malaysian Consular Ofﬁcer. The OCA 1990 does not provide for winding up procedures but winding up procedures in the Companies Act 1965 are adopted in full. apostille can only be obtained in a country which is a signatory to or has ratiﬁed the Hague Convention on Legalisation of Foreign Documents. 6) Letter of Information or Letter of Good Standing. Then the copy is sent to the Malaysian Consular Ofﬁce in Putrajaya where a Consular Ofﬁcer conﬁrms that the signature appearing on the copy is that of the Notary Public. 2) Form 14-Allotment of Shares. For example if a certiﬁcate of incorporation needs to be legalised and used say. ‘Court’ means a High Court or a judge thereof.Can apostille be obtained in Labuan? No. The actual wind up process must be conducted by a liquidator approved by the Registrar. How are the documents of a Labuan company legalised? The most common is back-to-back legalisation. What are the common documents and information required for banking purpose? The most common documents are 1) Form 7-Certiﬁcate of Incorporation. a copy of the certiﬁcate must be certiﬁed as a true copy by a Notary Public. 5) Memorandum & Articles of Associations. 9) resume of directors. in the UK. The court adjudicating legal matters involving Labuan offshore companies is the High Court of Sabah & Sarawak. 7) bank reference. 8) business proﬁle. Malaysia is neither a signatory nor has it ratiﬁed the Convention. 46 . Who is the company registrar in Labuan? The Registrar of Companies is LOFSA What is the procedure to wind up a Labuan offshore company? An offshore company may be wound up voluntarily or by the court. This process takes at least six months or longer. How long does it take to register a Labuan offshore company? One to two days. sitting in Labuan. Which courts adjudicate legal matters involving Labuan offshore companies? Here. 10) and sometimes qualiﬁed intermediary certiﬁcate or letter of introduction from the trust company. 3) Form 20-Notice of Situation of Registered Ofﬁce. How long does it take to reserve a name? One day or less.
minutes of directors’ meeting indicating where meetings are held and what decisions in relation to “management & control” were taken. Can a Labuan offshore company deal with a resident? Generally no but an exemption was recently given allowing a Labuan offshore company to deal with a resident provided i) the LOC sends notice (in a prescribed form) to LOFSA not later than 10 days from the date of transaction with the non-resident took place. both Ringgit account and foreign currency accounts. and by submitting among others. by making an application to the Inland Revenue Board. it is permitted pursuant to the non-declaration status granted by BNM and ECM 15 where such account is solely for the purpose of defraying administrative expenses. by obtaining approval from the Registrar and thereafter apply for an instrument transferring the offshore company to another country. Labuan branch. All instruments which are executed by an offshore company in connection with an offshore business activity shall be exempted from stamp duty which would otherwise be chargeable under the Stamp Act 1949. credit card statement and utility bills. What is proof of residence and when is it normally required? Proof of residence tells where a person normally lives and this can be in the form of a bank statement.Can a tax resident certiﬁcate be obtained in Labuan? Yes. 47 . etc. Proof of residence is commonly required by a trust company before entering into a business relation with a client and by a bank before an account can be opened. FIC. b) the rationale and advantage of the transaction using an LOC including tax beneﬁts. Can a Labuan offshore company open a bank account with a domestic bank? Yes. SEC. What is re-domiciliation? Re-domiciliation is the transfer of one company from another as if the transferred company has been incorporated in the other country. Is stamp duty payable? Stamp duty is exempted. Can a Labuan offshore company open a Ringgit bank account? Yes. and photocopies of the director’s travel documents showing his entry into and exit from Malaysia. The notice should at least specify a) details of the transaction/investment. and ii) the transaction undertaken by the LOC and the resident (where applicable) has obtained necessary approval from relevant domestic regulatory authorities like BNM. etc. Is there a standard table for M&A? No. and c) total amount and source of funding in the transaction or investment. Most trust companies use their own standard M&A versions although variations may be made. Can a Labuan company re-domicile? Yes. Memorandum & Articles of Association.
” Offshore trading activity includes banking. 48 . However from 31st of March 2006.000 for an offshore company with authorised capital not exceeding the equivalent of RM50.” Offshore non-trading activity means an activity relating to the holding of investments in securities. It is possible to re-instate a company after being struck off and there is no time limit for re-instatement.000 for an offshore company with authorised capital exceeding the equivalent of RM1million. When is audit not required? When an offshore company is carrying on offshore business activity which is a non-trading activity. RM2.What is the maximum authorised capital fee payable? There are three bands of authorised capital fees in Labuan.000 in foreign currency. What is an offshore trading company? This is a misnomer and an over simpliﬁcation which is often used when describing an “offshore company carrying on an offshore business activity which is an offshore trading activity. trading. licensing or any other activity which is not an offshore non-trading activity. deposits and immovable properties by an offshore company on its own behalf. the Inland Revenue had agreed to grant all Labuan offshore companies a standard extension to ﬁle tax returns up to 31st May every year. Can a secretary other than a resident secretary be appointed? Provided the ﬁrst secretary is a resident secretary (who is an ofﬁcer of a trust company) any number of additional company secretaries may be appointed. Therefore the deadline to ﬁle is 31st May every year. When must a Labuan offshore company ﬁle its tax return? LOBATA provides that an offshore company must ﬁle its return of proﬁt within a period of three months from the commencement of a year of assessment. This usually applies to passive businesses like investment holdings. What is an offshore non-trading company? This is a misnomer and an over simpliﬁcation which is often used when describing an “offshore company carrying on an offshore business activity which is an offshore non-trading activity. insurance.000 but less than the equivalent of RM1million in foreign currency and RM5. Year of assessment means calendar year. management. loans. Is a Labuan company required to hold its ﬁrst AGM within 18 months? There is no equivalent provision in the OCA 1990 so there is no need to hold the ﬁrst AGM within 18 months and thereafter within 15 months. shares. stock.000 for an offshore company with authorised capital exceeding the equivalent of RM50. When is audit required? When an offshore company chooses to pay 3% tax or is licensed. Can strike off be applied? A Labuan offshore company may apply for strike off voluntarily or get its name struck off from the register due to non-payment of the annual fee. 1) RM1.
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