How to Establish an Offshore Company in Malaysia: A Guide

When we talk about Labuan, some of you may think of the offshore company in Malaysia. Labuan, or the Federal Territory of Labuan, is recognised as an offshore financial centre that since 1990 has provided global financial and commercial services through Labuan IBFC. 

It is also recognised as an offshore support facility for the deepwater oil and gas industry in the area.

Like many low-tax countries, Labuan enforces a no-tax policy for the vast majority of enterprises earning income from sources other than Malaysia. 

These days, Labuan serves as both a centre of international commerce and a gateway to the market of Malaysia.

This guide will discuss the overall explanation of Labuan and how to establish an offshore company in Malaysia’s island federal territory. 

What Is an Offshore Company?

Before we dig deeper into the offshore company in Malaysia, let’s talk about offshore companies first. 

Offshore is a place to set up corporations and investments outside the home country. 

For more advantageous circumstances, such as tax avoidance, loosened restrictions, or asset protection, businesses and people may relocate offshores. 

While offshore institutions aren't illegal, they may be utilised for unlawful activities as well.

The main objective behind establishing an offshore business is to benefit from advantageous tax regulations or a more advantageous economic climate in another nation. 

Although its owners may reside abroad, the firm will be incorporated and run under the laws of that jurisdiction.

What Is Labuan Offshore Company?

After reading the explanation above, now you know that offshore is a location where you can set a business up outside the home country. 

For offshore company Labuan, it is permitted to deal in all currencies, carry out shipping operations to any location, including Malaysia, do business with both non-resident and resident corporations in Malaysia, and provide goods and services in unregulated industries.

Forming an offshore company in Malaysia can give you advantages, such as:

• The capability to own the whole business without locals. 
• For stays in West Malaysia and Labuan, you and your family members with children under 21 years old can apply for a two-year renewable multiple-entry business visa.
• No need to do an audit report. 
• The capability to open a corporate brokerage account to trade stocks and FX.
• For a more reliable policy, putting assets in an offshore business with an incorporated legal structure offers a strong layer of protection against any liabilities.
• No sales tax, no VAT, no customs duties, no corporate tax, and no stamp duty. 
• The adaptability of foreign currency bank accounts or trade-in Ringgit Malaysia.
• No tax on the director’s fees and dividends. 
• Most businesses do not require a trade license. 

Steps of Offshore Company Formation in Malaysia

Even though non-citizens are welcome to open an international business in Malaysia, especially in Labuan offshore company, the business owners need to be aware of these departments if they want to start one:

• Central Bank of Malaysia.
• Labuan Company Formation Authority.
• Malaysia Immigration Department.
• Inland Revenue Authority.

After that, they can prepare for offshore company registration, including:

Documents for Establishing an Offshore Company in Malaysia

Before registering your company, it is important to prepare for the documents needed, such as: 

• Memorandum and Articles of Association of the proposed Company.
• Acceptance to serve as a director.
• Detailed business plan of proposed Labuan company.
• The trust company’s statutory declaration of compliance
• If any licences are needed to conduct business, they must be obtained and authorised before the company's establishment.
• Proof of residential address must be provided by each stakeholder in the business (personal bank statements or original utility bills are recommended).
• NRIC or passport copies for each stakeholder and account signatory (which need to be certified).

Requirements for Establishing an Offshore Company in Malaysia

Not only the document, you have to take a look at the requirements you need to fulfill, such as:

• Choose the name and identity of the company. 
• Decide on the business structure.
• Select a suffix for the business name (Limited Ltd., Co., Ltd., Limited, Inc., or Labuan)
• Ascertain the ownership proportion of each stakeholder.
• Prepare the minimum authorised capital. 
• Open a bank account. 
• Prepare the registration fee. 
• Foreign nationals will be allowed to apply for a two-year business visa with multiple entries.

How to Register an Offshore Company in Malaysia?

After preparing the documents and requirements, you can start registering your company by doing the following process:

1. Choose a Business Structure

As mentioned above, you have to decide the business entity for your company. You can choose one of the following entities:

• Foundation: Mostly created for philanthropic reasons, but it may also operate as a unique type of business, overseeing assets and doing business for the benefit of its members.
• Company: You can go with limited liability to separate the business and personal liability. 
• Partnership: Usually used by small businesses when two or more individuals decide to divide the profits and responsibilities of one company.

2. Provide and Submit Data Needed

You have to gather the documents and the requirements above and submit them to the authority. If you are required to pay fees, you can prepare the budget from now on. 

For detailed information about fees, let’s take a look at the information below:

• Reservation of company name: RM50.
• Companies with RM50,000 and below in capital: RM1000.
• Companies with more than RM50,000 but less than RM1 million in capital: RM2000.
• Companies with more than RM1 million capital and above in capital: RM5000.
• Foreign Labuan company: RM6000.
• The annual fee for Labuan company: RM2600.
• The annual fee for Foreign Labuan company: RM5300.
   

3. Obtain Certificates of Company Incorporation

After doing the steps above, you can get the certificate of incorporation and run your business. Usually, the registration takes 2-4 weeks. 

This is information about the offshore company in Malaysia, including the definition and the steps to register your company. 

Not only do you pay attention to how you establish your company in Malaysia, but you should consider other aspects that support your business, like appropriate marketing strategy. 

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