Labuan Offshore Companies
Benefits and advantages of Labuan Offshore Companies:
Labuan companies may carry out trading and non-trading activities on or via the island through the Labuan International Business and Financial Centre and there are many benefits and advantages of incorporating offshore companies in Labuan which includes the following:-
Trading Companies: An importing or exporting company could incorporate an offshore company in Labuan to take orders directly from customers and have shipment of goods delivered directly to the customer’s delivery destination from the supplier’s location. As such, any profits arising out of the difference between the selling price and the cost of goods sold on a net basis would then be accumulated and subject to the low tax rate under Labuan jurisdiction.
Investment Companies: Funds accumulated through investment companies set up in offshore jurisdiction can be invested or deposited in other parts of the world. As returns or interest derived from these funds are generally subjected to local taxation, offshore jurisdiction such as Labuan allows funds to be placed in tax-free bonds or as bank deposits where interest is payable at gross. Furthermore, there is no capital gains tax under Labuan’s offshore jurisdiction.
Holding Companies: An offshore holding company can be used as a strategy to finance the operations of subsidiaries located in various countries so as to enable the subsidiaries to enjoy the benefits of tax deductions on interest received in offshore jurisdictions. If the holding company is situated in an offshore jurisdiction such as Labuan where there is low income tax and no legal requirements for dividends to be declared or paid, the additional profits derived and accumulated in the low-tax environment can be conveniently utilized to finance the operational and expansion requirements of subsidiaries.
Probate and Privacy: A high net worth individual with properties or assets in a number of countries may prefer to hold such properties or assets under the medium of a personal holding company so that upon his demise, probate would be applied for, in the country in which his personal holding company was incorporated rather than in each of the countries where such properties or assets are located. This could save a lot in terms of legal fees as well as to avoid undue publicity issues.
Property Owning Companies: There are great advantages of using offshore property holding companies for the purpose of holding overseas properties. As for offshore jurisdiction such as Labuan, there is no inheritance tax and no capital gains tax. In addition, an offshore property holding company would conveniently facilitate a property sale as the transaction can be easily affected by transferring of shares in the company rather than transferring the property held under the company. Consequently, the transaction cost would also be effectively lower as compared to a sales an purchase transaction by way of property transfer.
Professional Service: Individuals who receive substantial amount of fees in respect of their professional services in their capacities such as designer, consultants, authors or entertainers may assign or contract with an offshore company giving it the right to receive such fees.
Shipping Companies: Offshore shipping companies are utilized to eliminate direct or indirect taxation on income derived from shipping activities. Shipping companies may own or charter ships and the profits from such activities can be accumulated on a low-tax basis in Labuan offshore jurisdiction.
Patent, Copyright and Royalty Companies: An offshore company can purchase or be assigned the rights to use a copyright, patent, trademark or know-how by its original holders with the right/poer to sub-license them. Upon the acquisition of the intellectual property rights, the offshore company can then enter into an agreement with licensees around the world who would be able to exploit the intellectual property rights in various countries.
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