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Labuan: Offshore Legal and Tax Regimes

Offshore Operations

An Offshore Company (or an Offshore Foreign Company) is only permitted to carry on business in, from or through Labuan. An Offshore Company may not:

  • carry on business with a resident of Malaysia except as permitted by the Offshore Banking Act 1990;
  • carry on the business of Banking or Insurance or such similar business unless it is licensed so to do under the Offshore Banking Act 1990 or the Offshore Insurance Act 1990;
  • carry on business in the Malaysian currency except for defraying its administrative and statutory expenses;
  • carry on business of shipping or petroleum operations in Malaysia or carry on business as a trust company.
The Offshore Companies Act was amended to allow Malaysians to own offshore companies, as well as to permit foreign-owned offshore companies to invest in Malaysia subject to certain conditions.

Manufacturing activities are normally carried out by companies incorporated under the Malaysian Companies Act. An activity which is neither offshore trading nor offshore non-trading will be subject to tax under the regular tax regime.

Offshore insurance and banking businesses are permitted to maintain a marketing office in Kuala Lumpur until the Government decides that the management office should be relocated in Labuan.

An Offshore Company is not treated as carrying on business with residents of Malaysia if:

  • it makes or maintains deposits with a person carrying on business in Malaysia;
  • it makes contact with professional advisers carrying on business in Malaysia;
  • it prepares and maintains books and records in Malaysia; it acquires or holds any lease or property for operational purposes or accommodation of its employees;
  • it holds directors’ or members’ meetings within Malaysia;
  • it holds shares, debt obligations, or other securities in a company incorporated under the Offshore Companies Act 1990 or in a domestic company, or holds shares, debts obligations or other securities for the purposes of a transaction entered into in the ordinary course of a money-lending business.

 

 

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