What is an Investment Holding Company?

An investment holding company is usually registered with the intention of consolidating the ownership of the companies and assets under one umbrella for better and easy management of assets and investment policies of the invested company. It represents a parent company for the other businesses in which it holds voting shares and even the holding company can own voting rights in one or more companies. Why Investment Holding Company is a popular structure? It is used by many business owners to hold various personal assets including properties, equities, yacht, company shares, stocks and other various investments as the ownership is preserved and to consolidate all foreign companies and entities under one holding company.

Labuan jurisdiction offers great advantages for the setting up of an investment holding company as it enables business owner’s great degree of confidentiality while operating it with flexibility. Labuan Investment Holding Company are free from taxation unless they engage in business activities or profitable investments; in that event, income obtained will be taxed at 3% after net profit. In addition, the investment holding company has the right of appointing directors in other companies and the subsidiary cannot at in this sense without the consent of the holding company.

Permissible Activities of an Investment Holding Company in Labuan

Labuan Investment Holding Company allows you to hold investments in securities, stocks, shares, deposits, loans and immovable properties. It can be used as listing in major exchanges such as Australia, Hong Kong, Dubai, Singapore and Malaysia. In addition, business owners can use the Labuan Investment Holding Company to invest into blockchain technologies.

Benefits of an Investment Holding Company in Labuan

One of the main advantages of an investment holding company in Labuan is that it can be used for structuring purposes on various foreign companies and entities to merge all incomes. This company allows for foreign ownership to be maintained throughout the structure, makes acquisitions simpler in the event of a buyout or sale of the entire group, and promotes asset and wealth protection. For instance, such company structure held by a foundation or trust can also be a very powerful asset protection arrangement.

Keeping track of numerous investments, which may be held in various accounts and locations, can result in a substantial administrative burden. Having an investment holding company, however, enables the individual / shareholder to hold shares in the holding company and the company holds all the investments. The company shall prepare the accounts every year, thus allowing a consolidated review on the performance of the various investments.

An investment holding company can also be a useful tool in succession planning. For instance, where a share portfolio is held personally by the father of the family and eventually be inherited by his children; upon his death the portfolio in normal and ideal circumstances will usually be liquidated and the proceeds be divided among his children, in accordance with his will / wishes. But in some situations, there may be time when the father passes away suddenly and didn’t have the time to sell the shares for some reasons. This shall lead to a substantially slower realisation / liquidation of the shares.

Such problem can be avoided if there was an offshore structure in place. By having the portfolio / shares through an investment holding company, the children would inherit the father’s shares in the company and the share portfolio could then be maintained until the share value increases to a more appealing level before liquidation / selling. Such flexibility to optimise the timing for the sale of investments would also apply to other assets held by the company, such as real estate property, private planes, luxury items like art collections, etc.

Having an Offshore Company also offers substantial tax advantages, for instance if the company is incorporated in Labuan where the corporate tax is 0% for holding activities and 3% for trading activities. Company profits pay out by way of dividend is also not taxable – 0% tax! Identification of such tax efficiency methods do benefit the company and such tax savings can be put to better use ie business expansion, investments, research and development projects, investment in manpower and staff appreciation / renumeration programme etc.

QX Trust, your one-stop service provider!

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 how a Labuan Investment Company can help restructuring your business and taxes.