Malaysia Hotline: +603- 2141 8908
Malaysian External Investment
“The Malaysian Satay”
was the name given to a corporate structure which has traditionally involved
the ownership of a foreign subsidiary by a resident Malaysian holding company
which is in turn 100% wholly owned by an offshore Labuan parent corporation. In
this structure, reduced rates of foreign withholding tax obtainable through double
tax treaties (Malaysia has more than 60, although not all are in force) are not
compromised by the offshore status of Labuan; yet the income once in the hands
of the Malaysian parent can be passed on without further tax to the Labuan
holding company.
If the foreign
subsidiary were owned directly by a resident Malaysian company with no offshore
Labuan connection then domestic Malaysian taxes will have to be paid; if the
foreign subsidiary were owned directly by a Labuan holding company, no
Malaysian taxes will be paid, but an increasing number of treaty partners are
denying treaty benefits to Labuan companies.
Foreign Direct Investment in Malaysia and Korea
Whilst foreign corporations
traditionally require government permission if they are to own shares in a
Malaysian company this requirement has usually been waived where the Malaysian
company is to be 100% owned by a Labuan company which is in turn 100% owned by
foreigners. Foreign ownership rules had previously deterred foreign companies
from owning Malaysian corporations.
Dividends and other
income earned by foreign investors in Malaysia can usually be extracted through
Labuan without taxation.
The interposition of a
Labuan company by investors into Korea and other regional target markets has
benefits because income can be routed through Malaysia or Labuan in order to
take advantage of double taxation treaties and the absence of taxation between
Malaysia and Labuan. This route has been much used by investors into Korea: it
is said that more than a third of Labuan companies are used as holding
companies for Western investment into Korea.
A Labuan company
selling in China may take advantage of the treaty between Malaysia and the PLC
so as to avoid the representative office in the PLC being regarded as a PE.
Labuan Offshore Tax Treatment of Foreign Employees
A non-Malaysian
citizen employed in Labuan in a managerial capacity would have been exempt from
payment of tax on up to 50% of his employment income until 2004; this
concession has been extended a number of times, so it is worth checking the
current tax status of overseas employees before the decision on whether to live
and work in Labuan is made.
Contact us
If you have further queries, please contact Tannet
24 hours Malaysia hotline：603-21418908;
24 hours Hong Kong hotline：852-27837818;
24 hours Hong Kong hotline：86-755- 36990589;
Email: mytannet@gmail.com
TANNET GROUP : http://www.tannet-group.net, http://en.tannet.com.my