Doing Business in Malaysia | QX Trust | Offshore Labuan Consultants

Foreigners are allowed to set up businesses with 100 percent foreign ownership in Malaysia, be it via a private limited company, generally known as a Sendirian Berhad (ie Sdn Bhd) or a Labuan international company.  For tax-efficient planning purposes, setting up an offshore company in Labuan would be ideal and is very easy with just one person as the shareholder and director of the company.

Amongst other things, the corporate tax applicable to these companies are as follows:

Private Limited Company (ie Sendirian Berhad Company)

In the case of a locally/Malaysian controlled company wherein the ownership of the Malaysian shareholder exceeds 50 percent in the company, the tax rate after net profit is as follows:

  • Net profit less than MYR 500,000 – 19 percent
  • Net profit more than MYR 500,000 – 24 percent

In the case of a company controlled by a foreigner or an expatriate withmore than 50 percent ownership in the company, the tax rate applicable on the net profit is 24 percent.

Labuan International Company

There are three tax options for the following Labuan companies:

  • No tax and audit for a dormant company
  • No tax and audit for an investment holding company
  • 3 percent tax on net profit for companies involved in trading activities and to any income derived; audit report is required

Common Reporting Standard (CRS) in Malaysia

Malaysia, amongst many countries globally, has adopted CRS which was established in 2014. As a result, Reporting Financial Institutions are required to reveal the jurisdiction wherein a person is tax resident irrespective of whether Malaysia has executed a CRS agreement with the jurisdiction or not. This approach minimises the need for performing due diligence whenever a new jurisdiction adopts CRS.

As CRS encourages automatic exchange of account information in tax matters to promote as well as facilitate cross-border tax transparency, this is also applicable to expatriates who are doing business in Malaysia. In Malaysia, CRS is implemented with respect to income tax, Labuan business activity tax, and CRS Guidance Notes issued by the Malaysian Inland Revenue Board (IRB).

CRS enables tax authorities in tackling offshore tax evasion. This is achieved by exchanging information on wealth held by overseas residents. Malaysia has already put in place laws to ensure enforcement and strict adherence to CRS.

It is important for business owners to be aware of compliance requirements as authorities will use appropriate measures under domestic law to address errors or non-compliance. Further, management of entities under the scope may be held liable if the entity does not comply with CRS laws in a correct and timely manner.

With the CRS initiative in place, QX Trust CRS services include:

  • CRS advisory and consultancy
  • CRS entity classification
  • CRS onboarding of new clients / accounts
  • CRS existing accounts due diligence and compliance review
  • CRS reporting