Advantages of An Offshore Company

Advantages of An Offshore Company

If you are considering starting your own organisation, you may consider establishing an offshore company. An Offshore Company provides benefits which regular companies cannot match. Prior to deciding what kind of organisation to establish, best to understand how an offshore company can benefit you.

What is an Offshore Company?

An offshore company is an organisation which has been incorporated outside of its native country. For instance, if your company functions in the United States, then you can establish an offshore company in countries like Malaysia, Singapore, Panama, and other countries which are friendly with foreign organisations. The offshore company cannot conduct business within the host country.

The way that an offshore company functions primarily depends on where it was incorporated. An offshore company in Panama, for instance, has all the legal rights of an individual. It is owned by a collective of stakeholders. Although those stakeholders, are only held liable for the amount that they invest in the company. This safeguards them from significant losses which could outcome from business failures, lawsuits, and other unforeseen events.

Advantages of Setting-up Offshore Company

The main uses and advantages of offshore companies are:-

Tax Planning / Minimise Tax

Offshore company income is exempted from local corporate taxation, taking into account that the offshore company engages in no local business in where it is incorporated.

Privacy & Confidentiality

The offshore company records of directors and shareholders are not publicly available.  This maintains the confidentiality on the company and personal details of all directors and shareholders.

International Trading

By using offshore companies for international trading transactions, it is possible to enjoy higher profits generating from these transactions mainly due to the low tax regime offered by the offshore jurisdiction that the company is domiciled in.

The offshore company will manage purchases and sales operations, taking benefit of the fact that its profit will not be taxed, or only at a low level, depending on the jurisdiction.

Wealth Protection

High net-worth individuals are able to use offshore companies as Personal Holding Companies and ultimately benefit from the recommended corporate tax structure.

Holding Property or Fixed Asset

Offshore companies are routinely employed to own property and real estate. Apart from confidentiality, the benefits and advantages they provide include exemption from particular kinds of taxes (for example, inheritance tax).

Holding Company’s Stock, Bond and Cash

Cash assets held offshore enjoy deposit interest which is not taxable. Offshore companies are frequently used for share or foreign exchange transactions. The primary causes being the anonymous nature of the transaction (the account can be opened under a company name) and little or no tax levied on profits made.

Holding Investments in Subsidiary Companies

Capital gains generating from the disposal of particular investments can be made without taxation.

In the event of dividend payments, lower withholding taxes can be achieved through the use of a company incorporated in a zero or low tax jurisdiction which has double tax agreements with the contracting state. For Labuan, there is no withholding tax which is one of the many key benefits of incorporating a company in this Asia jurisdiction.

Employing Double Taxation Treaties through Intermediary Holding Companies

Companies seeking to invest in countries where a double tax agreement does not exist between both countries can establish an intermediary company in a jurisdiction where there is an ideal treaty. This would be another added advantage in the aspect of taxation especially for Labuan companies as Labuan offers a multitude of tax treaties from more than 70 countries, making it the preferred offshore jurisdiction in the current era.

Holding Patent, Royalty and Copyright

Intellectual property comprising of patents, trademarks and copyrights, can be owned by, or assigned to, an offshore company upon the acquisition of the rights. The rights can then be franchised to companies around the world and the consequential income can be accumulated offshore.

E-Commerce

Internet traders can utilise an offshore company to keep up a domain name and to handle websites. Digital based business can opt to incorporate the registered office of your company in an Offshore Jurisdiction to take advantage of several benefits provided by these jurisdictions.

Labuan Offshore Company

Setting up a trading company in Labuan jurisdiction is an ideal choice as it offers a wide range of business activities permissible under the regulation of Labuan Financial Services Authority. Furthermore, Labuan jurisdiction being a mid-shore jurisdiction, gives the provision of dealing with the local market that is subjected to the local tax regime. With this advantage, more business opportunities and flexible trading methods are produced for foreign and local owners.

Advantages of a Labuan Trading Company

  • Corporate tax 3% on audited net profits for international dealings.
  • Corporate tax 24% on audited net profits for Malaysia dealings.
  • No service tax (ie SST and GST) applies for international business dealings.
  • No withholding tax on interest, dividends, management fees and royalty.
  • No stamp duty for transfer of shares and Labuan business activities.
  • 0% personal income tax on Directors’ fees for foreign Directors.
  • 50% tax rebate on personal income for foreign high management employments.
  • 65% tax rebate on personal income of Malaysian high management employments.
  • Enjoy Double Tax Agreement (DTA) with more than 70 countries .
  • Able to deal with Malaysians by permanently electing the corporate tax of 24%.
  • Labuan offshore banks do not have foreign exchange control.
  • Labuan offshore banks imposed no tax on interest earned on deposit placements.

 

QX Trust is one of the top service providers in Labuan with more than 10 years of experience in offshore consultancy for corporate structuring, financial business license application and private wealth management solutions. Contact us at +60 3 9212 6940 or consultant@qx-trust.com for a complimentary consultation on corporate restructuring and offshore taxes as well as how a Labuan offshore company benefits your business.