Comparison of Labuan Company and Malaysia Sdn Bhd
Often most foreigners confuse the type of business entity in Malaysia they should own when starting a business in Malaysia. Basically, there are two commons entities which widely adopted by foreigners and this also depends on the nature of their business for license eligibility. For those intending to set-up shops, restaurants in Malaysia, setting up the local Malaysia Sdn Bhd company is ideal as this type of business nature required permission from various local government departments and the local town council for various types of licenses to operate.
With effective 1st Jan 2019, the new tax rate will be 3% for Labuan Trading Company trading with Malaysia companies or residents with the requirement to report the transactions with the Labuan Authority. Pure investment holding company, the tax rate remains unchanged at zero while investment holding company on Intellectual Property attracts a new tax rate of 24%.
Below is the table of information outlined the comparison of Labuan Company and Malaysia Sdn Bhd for import, export, advisory, trader, consultancy and advisory business.
|Item||MALAYSIA SDN BHD COMPANY||LABUAN INTERNATIONAL COMPANY|
|Target Market||Malaysia||International (Malaysia is permissible)|
|Paid Up Capital||a.RM1 million for 100% Foreign-Owned with WRT license
b.RM400,000 for Joint Venture with Malaysian
|Min. USD1 for 100% Foreign Owned|
|Requirement||Min. 1 Director and 1 Shareholder, unlimited shareholders (can be the same person) Maximum: 50 for each capacity||Min. 1 Director and 1 Shareholder, unlimited shareholders (can be the same person). Maximum: 50 for each capacity|
|Officers in Office||Individual or Corporate is permissible for all officers||Individual or Corporate is permissible for all officers|
|Trade License||Business license and industry license category, depends on business nature and required local Malaysian participation, click here for more info!||Business license required but most business activities no need industry license, click here for more!|
|Re-Domicile||Not possible||Easily can be transferred to any jurisdictions who recognize Labuan Company|
|Local Investment||Can hold shares in Labuan Company and any form of investments||Can hold shares of Malaysia Sdn Bhd and any form of investments|
|Corporate Tax||24% for both local or international market for 100% foreign-owned or company with paid-up more than RM 2.5 mil.||3%|
|Personal Tax||All expatriates employment including directors with 0-28% tax rate||All Directors – 0% tax and Expatriate employment tax rebate 50% of 0-28% tax rate|
|Audit Reporting||Yes, unless it is a private exempt company or less than RM300,000 turnover||Yes for trading companies. Investment holding company is exempted|
|Operation Office Set-Up||Yes||It is recommended for tax proofing due to CRS|
|Yearly maintenance cost||USD 1,500 to USD1,800 for secretarial, audit and tax agent. Audit and tax agent fee varies depends on the volume and complexities of financial reporting||USD2,350 for LFSA and secretarial fee. Audit fee depends on the volume and complexities of the financial reporting|
|Confidentiality||All information including financial accounts are searchable, without permission||Strictly confidential unless permission allowed by the owner/officers of the Labuan Company|
The above clearly outlined the advantages of both entities of Malaysia Sdn Bhd and Labuan company. Feel free to contact us at +603-2783 9191 (Labuan Division) or email to better advise you to meet your objectives in Malaysia. We “simplify the complexities” for your business investment in Malaysia! Send us your inquiry today!