When we think of offshore havens for companies in Asia, the first places that usually come to mind are Singapore and Hong Kong. However, even though these two places have good stability and reputations, it’s also necessary to keep in mind that they are quite expensive and have fewer advantages than other jurisdictions.
Luckily, there is another spot in Asia comparable to the first two, where you can start an offshore business or bank account more economically and with larger tax advantages. The place we’re going to talk about today is hidden deep in Malaysia, a country where English is widely used.
The hidden Asia
The place we are talking about is less than an hour from Singapore, accessible via Air Asia for tickets as low as $11. These low cost prices are part of the secret of this tax haven. There you’ll find the headquarters of not only the airline Air Asia, but also multiple other Asian companies.
It’s been a tax haven for more than a quarter of a century, however given the draw of Hong Kong and Singapore, it’s never been the center of international attention. This is going to change, though, as many wealthy Asians notice it more.
We’re talking about an area in one of Singapore’s neighbors, Malaysia. But unlike the capital Kuala Lumpur (the city that appears as the main photo in this article), it’s found directly to the east.
It’s a small island with some 78,000 inhabitants, right across from the state of Brunei, on the island of Borneo. Here you find the federate state of Labuan, an offshore financial center since 1990.
How to start a business in Malaysia
Labuan is an autonomous region within Malaysia, which allows a large amount of freedom when choosing state legislation. Labuan allows you to enjoy the advantages that come with being part of the State of Malaysia, including numerous double taxation agreements and tax advantages for foreigners.
This lets foreigners pay taxes in Malaysia instead of their country of origin, provided that this country had signed an agreement allowing this.
That being said, it’s not quite that easy for Spaniards. The double taxation agreement with Malaysia expressly excludes the state of Labuan, something that possibly happens in agreements with other countries as well. The tax scheme in Labuan is truly advantageous.
Starting an offshore company in Labuan is quite simple. All you need is a director and a shareholder, and foreigners can be both at the same time. The company creation process only takes a few days and costs about $750 a year in fees. This is more than you pay in the Seychelles but it has a better reputation. This could have something to do with the mandatory submittal of an annual accounting report. This is to say, starting a company in Malaysia won’t let you save on accounting.
Never pay more than $7,000: interesting tax options in Labuan
Great tax advantages await you in Labuan, advantages that digital entrepreneurs should look closely at because they aren’t affected by the limitations of their business activities. If you want to enjoy the tax advantages in Labuan, you won’t be able to process transactions in the local Malaysian currency, the Ringgit.
Labuan offers a ton of interesting tax programs and options, options you can change year to year according to how the company is doing financially at that time.
If your business is in its infancy, you can choose to pay a fixed 3% annual fee. So, if during the first year you only earned $20,000 you only pay $600. What about if you earned $100,000? Well, you would pay $3,000.
If you manage an established company with big profits, you can decide to pay a poll tax of $7,000 (this is a fixed tax, regardless of your earnings). Starting at €234,000 worth of earnings, it’s worth it to move to the fixed poll tax.
And that’s it. Labuan isn’t a tax-free zone, yet it still continues to be a tax haven. Air Asia and many other international companies use these methods to pay less annual taxes than you do right now.
Combining an offshore business and offshore bank account in Malaysia
If you want to set up an offshore account for your business, you can open this directly on the island of Labuan. Unlike what happens in the Caribbean, here you’ll find well-known banks such as Deutsche Bank, Bank of America, JP Morgan or BNP Paribas along with local banks.
So, you won’t have any difficulty opening up an account in Labuan. In fact, Labuan is the easiest spot to open up a bank account in Asia; it’s even easier than in Hong Kong.
Another advantage to Labuan has to do with the influence of the Asian and Islamic cultures. Banks in Muslim countries offer large opportunities and along with Dubai, Labuan is one of the main centers on the global level. Sharia (Islamic law) doesn’t apply here, of course. The judicial system of Labuan, like that of Malaysia, is based on British Common Law, which is to say the rule of law is assured.
Labuan: an offshore destination in Asia
As you can see, Labuan is a very interesting place for people who want to start an offshore company in Asia. This isn’t just from a business point of view but also a financial and fiscal one. It offers you an easy entrance into the Asian and international markets, few taxes, and bank accounts for every need.
If you’re thinking about opening a business in Asia, you should carefully consider this option.
Because life is yours for the taking!