Made of numerous small islands, Malaysia is one of the most prolific economies in Southeast Asia, based on recent statistics that show a continuous increase of the country Gross Domestic Product. Moreover, 2017 is expected to bring another 4% growth to the Malaysian economy. The islands that form Malaysia are divided into states and federal territories and one of these is Labuan which comprises the island with the same name and six other smaller islands. Known as the “pearl of Borneo” by tourists, there is another side known by investors: Labuan is one of the most renowned financial centers in Southeast Asia.
Opening a company in Labuan has many advantages, but before we get to that part, we will take a look at what is required to start a business here.
The international company in Labuan – incorporation requirements
The international company is the most common and used vehicle to start a business in Labuan. However, there is also the company limited by shares, known by everybody as the Sdn Bhd. This type of company and the international company are the structures used by both local and foreign citizens who want to do business in one of the most secure offshore financial centers in Southeast Asia. The international company is also used by multinationals seeking to have headquarters in the region.
Opening an international company in Labuan implies several steps, some of them being completed before the actual registration of the company. What you need to take into account is that you will be required to prepare a solid business plan and choose at least three names for the company which must be submitted for approval. One of these names must be the one you want for your company and which is highly recommended to be easily legible. Another requirement is for the company name to bear the suffix Labuan. The best news is that you are not required to deposit any share capital when registering a Labuan international company.
With respect to the shareholding and management structures, the Labuan international company must have at least one shareholder and one director. The number of shareholders is limited to 50. Also, all shareholders will be verified by the authorities through a rigorous due diligence process. Even so, you don’t need to worry, as long as you provide all the documents requested by the authorities. This due diligence is required because most international companies in Labuan are used for holding purposes.
Steps to open a Labuan international company
Once all the pre-requirements are fulfilled, you can go ahead and prepare the Labuan international company’s incorporation documents, which are represented by the Memorandum of Association and Articles of Association. Upon drafting of these documents, the share portion of each participant must be established and written in the Articles of Association. Once the documents are ready, they must be submitted and approved by the Malaysian authorities: the Central Bank, the Inland Revenue Department, the Immigration Department, the Financial Services
Authority in Labuan
Once the Labuan international company is registered and its certificate of incorporation issued, there is one more aspect to take care of: obtaining a visa for Malaysia, in the case of foreign citizens. The good news is that, as a foreigner, you can also bring your family to Labuan. In the case of local investors, the next step is to open the company bank account.
Opening a corporate bank account in Labuan
A little more attention should be paid when opening a bank account for an international company in Labuan. This is because it takes up to a few weeks to set up the account. The first step to open an account for a Labuan international company is to establish a meeting with one of the bank’s representatives. Following that, the representative will verify the company’s incorporation documents. Also, you must also file an application with the Labuan Financial Services Authority which will issue the company information requested by the bank. Once the bank account is set up, you can collect a check book, if you need one or opt for various online banking services, which are highly recommended when opening an international company in Labuan.
If you are interested, there is also the option of opening an offshore bank account in Labuan, however, most of the time the rules related to the opening of such accounts change. Information on offshore bank accounts should be asked during the first meeting with the bank representative.
Why should you open an international company in Labuan?
There are many reasons why you choose to open a company in Malaysia, however the Labuan international company is more “special” because it offers more advantages than other types of business vehicles. One of the most important reasons is that, as a foreign entrepreneur, you don’t need a local partner. As you have seen above, there is no specific amount to be deposited when registering an international company in Labuan, which is not the case in other Malaysian territories or states. The only share capital requirement exception is that related to the application of 2-year work visas. The amount required in this case is RM 250,000.
The Labuan international company can be used as a holding or as a trading company, each type with its advantages. If we are talking about a holding company, it can be used to administer assets, properties or for wealth management purposes. From a taxation point of view, the Labuan international company used as a holding will benefit from a 0% corporate tax rate. The holding company does not have to pay any withholding tax on dividend payments, interests and royalties. Also, no management or technical fees apply in the case of Labuan international companies used for holding purposes. An international company registered in Labuan can benefit from the provisions of Malaysia’s double taxation agreements.
The Labuan international company used as a trading company will also have various advantages, among which: no trading license requirements for companies activating in the e-commerce, import/export or consultancy fields, a 3% tax on profits or a fee of RM 20,000. Also, trading companies are not subject to the goods and services tax (the GST) and to the sales and service tax.
The great number of advantages an international company in Labuan offers are not to be neglected, so if you have decided on this type of structure make sure you have gathered all the necessary information about the requirements and create a good personal and business profile to ease the company formation procedure as much as possible.