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International Offshore Financial Centre (IOFC)

 
 
Another unique strength and strategic advantage of Labuan is its thriving International Offshore Financial Centre (IOFC) which was established in 1990. Labuan IOFC offers a wide range of offshore financial products and services such as offshore companies, banking, leasing, insurance, trust business, fund management, investment holding, company management services, capital market financial instruments and Islamic financial services.
 
There are now more than 5,000 offshore companies originating from more than 70 countries in Labuan, of which more than half were from the Asia-Pacific region. In view thereof, the Government is giving greater emphasis to promoting business within the Asia-Pacific region, while continuing to attract companies from around the world to Labuan. There are also 59 international offshore banks, 112 insurance and insurance-related companies, 69 leasing companies, 19 fund managers and 20 trust companies operating in Labuan Offshore.
 
The attractiveness of Labuan IOFC is manifold. For example, it offers lower cost of operations including professional and other support services compared with other centres. There is no foreign exchange control in the Labuan IOFC as it operates under independent rules and legislations. Moreover, offshore companies in Labuan are declared as non-residents under the exchange control and their business activities are conducted in foreign currency rather than Malaysian Ringgit.
 
Labuan is suitable as a holding company location for subsidiaries in a number of countries, particularly since it has double tax treaties with more than 60 other countries, including most of those likely to be used for manufacturing operations.
 
While foreign corporations require government permission if they are to own shares in a Malaysian company, they need not do so if the Malaysian company is 100% owned by a Labuan company which is in turn 100% owned by foreigners. Dividends and other income earned by foreign investors in Malaysia can be extracted through Labuan without taxation.
 
The following are some of the benefits of an Offshore Company:-
  • Beneficial ownership does not have to be disclosed. Only a minimum of one shareholder, one director and one secretary (which can be corporate) is required. The standard authorised capital is US$10,000 with the minimum issued capital of one share, which may be fully or partly paid;
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  • Trading Offshore Companies pay 3% on net audited profits or the sum of RM20,000 a year. Non-Trading Offshore Companies (i.e. investment and holding companies) do not pay tax. Offshore companies which elect to pay tax of RM20,000 per annum are not required to file financial statements, and do not have to employ an auditor;
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  • Tax exemption on income in the hands of Malaysian or foreign recipients on dividends, royalties, and interests received from or by an offshore company; and
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  • No withholding tax is applicable to items of income specifically exempted from tax.
 
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