Expert Guidance in Business Start-Ups, Expansion and Emigration in Malaysia and the ASEAN Region.
MALAYSIA
Starting a Business for Residency and Emigration to Malaysia and ASEAN
Malaysia has emerged as a prime destination for individuals and families seeking long-term relocation opportunities in Southeast Asia. With its vibrant economy, cultural diversity, and excellent quality of life, Malaysia offers an attractive proposition for entrepreneurs looking to establish a business and make the country their home.
Among the various pathways to relocation, setting up a business via the Labuan Offshore Financial Center stands out as a particularly advantageous option. Aspirants can relocate to Malaysia by starting a business. There is a relaxed criteria they need to fulfill, that is far more attractive then similar opportunities in Thailand and the Philippines. We, at Azean Ventures, are here to provide you with expert guidance in business start-ups, expansion and relocation in Malaysia and the ASEAN region.
Why Malaysia?
Malaysia offers a unique blend of modern infrastructure, political stability, and a multicultural society. Its strategic location in Southeast Asia provides easy access to major markets, including ASEAN, China, and India. The country’s relatively low cost of living, high-quality healthcare, and excellent international schools make it an ideal choice for expatriates and their families. Additionally, Malaysia’s pro-business policies and investor-friendly environment make it a popular destination for entrepreneurs. Malaysia stands out as your gateway to business and residence in ASEAN.
The Little Known and Often Misunderstood Labuan Advantage.
Labuan, a federal territory of Malaysia located off the coast of Borneo, serves as an international offshore financial center. It offers a unique route for entrepreneurs to establish a business while benefiting from liberal financial regulations, attractive tax policies, and simplified residency processes. Here’s how relocating to Malaysia via Labuan works:
Incorporating a Labuan Company.
Start by setting up a Labuan company - the process is straightforward and efficient. The Labuan Financial Services Authority (LFSA) oversees the incorporation process, ensuring compliance with international standards.
1. Key advantages include:
Ease of Incorporation: The process is fast, with approvals usually granted within 2-3 days, a week at most.
Flexible Business Activities: Labuan companies can engage in a wide range of activities, including trading, consulting, and investment holding.
Tax Efficiency: Labuan companies benefit from a flat corporate tax rate of 3% on net profits derived from sources outside Malaysia. However, if the income is sourced from within Malaysia, the company will be subject to the standard Malaysian corporate tax rate of 15% - 24%.
2. Residency and Work Permits.
Entrepreneurs who establish a Labuan company are eligible to apply for a 2-year renewable work permit, which allows multiple entries into Malaysia. Work permits for Labuan company directors and their dependents are issued for 2 years at a time and every renewal is for a further 2 years. Key features include:
Low Minimum Income Requirement: Directors of Labuan companies need only demonstrate a minimum monthly income of MYR10,000 (approximately USD 2,200) to qualify for a work permit. This income can be from the business/company they set up in Labuan or from sources outside Malaysia.
Dependents’ Residency: Residence permits are available for the entrepreneur’s spouse, children and even dependent parents.
Freedom of Movement: Entrepreneurs and their families can reside anywhere in Peninsular Malaysia, not just in Labuan. Most successful applicants reside and conduct their business in the major cities such as Kuala Lumpur, Penang and Johor Bahru.
Pathway to Permanent Residency: Long-term residency in Malaysia can eventually lead to permanent residency status, subject to meeting specific criteria.
3. Banking and Financial Services.
Labuan offers access to world-class banking facilities, including international banks and digital banking solutions. Entrepreneurs can trade and bank in major currencies such as the US Dollar, Euro, and British Pound. The availability of digital banking services further enhances the ease of managing financial transactions.
Applicants can bring in an unlimited amount of money to capitalize their Labuan company. Funds from any legitimate source globally can be credited to the company’s bank account, offering flexibility for entrepreneurs with resources in different parts of the world. However, this advantage comes with responsibilities: Labuan companies must comply with global anti-money laundering (AML) and anti-terrorism financing (ATF) regulations. Entrepreneurs must ensure that all funds are from legitimate sources and maintain clear documentation to avoid being accused of illicit activities. Consulting with compliance experts and adhering to LFSA’s guidelines can help mitigate these risks. We, at Azean Ventures, will expertly guide you through this process and facilitate seamless remittances into and out of Malaysia.
4. Ongoing Compliance Requirements
Operating a Labuan company comes with specific compliance obligations to ensure its legitimacy and adherence to local regulations. These include:
Minimum Local Employees: A Labuan company must employ at least two local staff members. The minimum wage in Malaysia is RM1,500/- (approx USD 335/-) per month.
Local Physical Office: Maintaining a physical office in Labuan is mandatory. Rentals are as low as USD500/- per month.
Annual Audit:: All Labuan companies are required to undergo an annual audit and submit audited financial statements to the LFSA.
Company Secretarial Compliance: Companies must appoint a licensed company secretary and ensure timely submission of statutory filings, such as annual returns.
Criteria for Aspiring Entrepreneurs.
To relocate to Malaysia via Labuan, aspirants must meet the following criteria:
Business Incorporation: Successfully register a Labuan company and demonstrate a clear business plan.
Minimum Capital Requirements: While Labuan companies generally do not have capital requirements as such (US$100 is the the usual capitalization), some business activities (in the banking and financial sector) may necessitate specific capital thresholds.
Work Permit Application: Submit a work permit application supported by business documentation and proof of financial capability, including the minimum income requirement for directors.
Proof of Financial Stability: Show evidence of sufficient funds to support yourself and your dependents during your stay in Malaysia. This is tied to the minimum income for Directors. If you satisfy the minimum income requirement, this will usually also fulfill the standard of proof to support yourself and your dependents.
Compliance with Local Regulations: Ensure compliance with Malaysian laws and regulations, including the ongoing requirements for Labuan companies.
Comparing Malaysia with Thailand and the Philippines.
While Malaysia offers a compelling pathway for relocation through business incorporation, it’s essential to compare it with similar opportunities in neighboring countries like Thailand and the Philippines.
Thailand
Thailand is another popular destination for entrepreneurs and expatriates due to its vibrant economy and cultural appeal. However, its business and residency pathways differ significantly from Malaysia:
Business Incorporation: Setting up a business in Thailand requires a Thai majority shareholder for most industries, making it less attractive for foreign entrepreneurs seeking full control.
Residency Permits: Thailand offers a business visa and work permit for entrepreneurs, but the process can be bureaucratic and time-consuming.
Taxation: Corporate tax rates in Thailand are higher than Labuan’s 3% rate for offshore income, and the country has stricter regulations on foreign ownership in key sectors. The corporate income tax (CIT) rate is 20%. A foreign company not carrying on business in Thailand is subject to a withholding tax (15% in most cases) on certain types of asses-sable income (e.g. interest, dividends, royalties, rentals, and service fees) paid from or in Thailand.
Lifestyle and Infrastructure: While Thailand offers a lower cost of living, its infrastructure and healthcare facilities are generally not as developed as Malaysia’s.
The Philippines.
The Philippines has a growing economy and a large English-speaking population, making it an attractive destination for businesses. However, most foreigners from more advanced countries will find the bureaucracy very challenging. The challenges in the Philippines are as follows:
Business Incorporation: Foreign entrepreneurs can establish a business in the Philippines, but certain industries require Filipino majority ownership.
Residency Permits: The Philippines offers a Special Resident Retiree’s Visa (SRRV) for those who meet financial requirements, but it’s not specifically tied to business activities.
Taxation: Corporate tax rates in the Philippines are higher than those in Labuan, and the regulatory environment can be challenging for foreign investors. In general, the corporate tax rate for private limited companies currently stands at 35%. Dividends distributed by a resident company are subject to withholding tax at 25 percent; those distributed to non-residents are taxed at 15 percent.
Lifestyle and Infrastructure: While the Philippines offers a lower cost of living, its infrastructure and public services lag well behind Malaysia’s.
Why Malaysia Stands Out.
Malaysia’s Labuan Offshore Financial Center offers a unique combination of benefits that make it superior to Thailand and the Philippines for entrepreneurs seeking long-term relocation:
Ease of Business Setup: The straightforward incorporation process in Labuan is unmatched by the more complex requirements in Thailand and the Philippines.
Full Ownership: Entrepreneurs can fully own their Labuan company, providing greater control over their business operations.
Tax Efficiency: Labuan’s attractive tax regime—3% on offshore income—offers significant savings compared to the higher corporate tax rates in Thailand and the Philippines. For income sourced within Malaysia, however, the standard corporate tax rate of 15% - 24% applies.
Residency Flexibility: The ability to live anywhere in Malaysia while holding a Labuan work permit is a significant advantage over the more restrictive residency options in neighboring countries.
World-Class Infrastructure: Malaysia’s modern infrastructure, excellent healthcare, and high-quality education system make it an ideal choice for families.
Compliance Support: Labuan’s regulatory framework is clear and transparent, with professional service providers available to assist with compliance requirements.
Conclusion.
Relocating to Malaysia by starting a business through the Labuan Offshore Financial Center is a practical and advantageous pathway for entrepreneurs seeking long-term residency in Southeast Asia. The ease of business incorporation, attractive tax policies, liberal banking facilities and flexible residency options make Labuan an ideal gateway to the ASEAN market. Compared to Thailand and the Philippines, Malaysia offers a more streamlined and investor-friendly environment, ensuring a smoother transition for aspiring expatriates.
For those considering a move, Labuan provides the perfect blend of business opportunities, lifestyle benefits and strategic access to one of the world’s most dynamic regions. With the right planning and guidance, Malaysia can become not just a place to do business but a home for you and your family.
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