With CRS (Common Reporting Standard), it is important to have an active commercial substance to validate your presence in your jurisdiction of choice to justify to Local Tax Department.
Below are key commercial substance that the Tax Department would require for business activities in any jurisdictions:
1. Permanent Office
2. Local Employment
3. Key Management Decisions Made In Said Jurisdiction
4. Payment of Taxes
5. Annual Compliance In Order
6. Bank Account Location In That Jurisdiction
However, not every jurisdiction has the advantage for clients to easily create substance.
Here are 3 major flaws:
➢ Too far a distance to fly for meeting and manage operations for jurisdictions like Cayman, BVI, Seychelles or Dubai
➢ Too expensive for jurisdiction like Mauritius, Hong Kong and Singapore for operations set-up
➢ Time difference can also be the added stress on top of managing the operational substance
The company registered in non-CRS compliant jurisdiction may face closure of bank account. Tax Department will not issue Corporate Tax Certificate should the substance criteria is not fulfilled accordingly.
Low Operational Cost
Office Rental (Size: 50 – 300 sqft) USD 75 – USD 200
Basic Salary: Graduate From USD 300
Basic Staff: Experienced From USD 500
Telephone & Electricity USD 100 - USD 300
Return Air Ticket: KL to Labuan USD 75 - USD 100 p/pax
Notes: Above price range are estimated expenses on a monthly basis.
Let’s Take A Closer Look At What Labuan Has To Offer!
12 Key Advantages of Labuan
1. Labuan is a white-list OECD compliant jurisdiction recognised by exchanges like Hong Kong, Singapore, Australia, Dubai and Malaysia.
2. Labuan jurisdiction provides all vehicles for all types of businesses you need in one place.
3. Labuan Jurisdiction allows 100% foreign ownership!
4. Labuan is a low tax jurisdiction offering 3% corporate tax after net profit.
5. Labuan is a “midshore” jurisdiction which allows one to deal with the Malaysia local market.
6. Labuan is a jurisdiction that permits onshore and offshore banking in Malaysia.
7. Labuan jurisdiction offers application of work visa for companies to hire expatriates and their families to stay in Malaysia.
8. Labuan jurisdiction permits setting up of Marketing or Co-located Office in Malaysia with Labuan as the Management Office.
9. Labuan entities are able to obtain Tax and Good Standard Certificates, and it is fully compliant with their Annual Return and Tax filings.
10. Labuan is located within Asia Pacific offering similar time zone within the region for ease of doing business.
11. Labuan offers full tax exemption for profit / dividend payout to shareholder and directors.
12. Labuan is fully exempted from sales tax, service tax, GST and withholding tax.
For more information on Labuan Business Solutions, kindly contact Bestar RW William.