Labuan Work Permit Aquisition and Renewal Support Service
Bona Trust Corporation provides Labuan Work Permit Aquisition and Renewal Support Service.
1. Main features of labuan Work Permit
Labuan work permit is issued to the director of Labuan company.
In Malaysia, the government have a very flexible policy for foreign workers conducting commercial transactions utilising Labuan company, issuing work permit (hereinafter referred to as “work permit”) for directors and expatriates allowed to stay in Malaysia (* renewable every 2 years, renewal requires submission of application 3 months before expiration date).
In addition to directors and expatriates, work permit will be granted as dependent pass to their spouses and children under 21 years. Staying in Malaysia mainland (eg: Kuala Lumpur, Johor Bahru, etc.) is permitted not only within Labuan Island.
For entrepreneurs and investors, “tax incentives” are often taken up as important items when considering the incorporation in offshore jurisdictions such as Cayman, Bermuda, Mauritius or Seychelles. However, in addition to ‘tax incentive measures’ for Labuan entity, it is also a great appeal that you can acquire permission to stay not only in Labuan Island but also on the mainland of Malaysia by acquiring “Offshore visa (Labuan work permit)“. [* 1] [* 2].
2. Merits of Labuan Work Permit
By acquiring Labuan work permit, there are the following merits:-
|Merits of Labuan Work Permit||· Work permit holder can live not only in Labuan Island but also in the mainland Malaysia (eg: Kuala Lumpur, Johor Bahru etc.).|
|· It is possible to obtain work permit even for non-trading company that is aimed at asset management (In this case, corporate tax is exempted so issuance requirement becomes extremely strict).|
|· Shareholders’ dividends are tax exempt and can be accepted in full without tax.|
|· Because resident directors are unnecessary, even if the director leave Malaysia in the future, there is no need to dissolve Labuan company [*3].|
|· It is possible to smoothly carry out meetings and business trips between Labuan and other countries (eg: Japan, Hong Kong, Singapore, etc.) Business activities are not allowed for foreigners without work permit in Malaysia Immigration Law) .|
|· Since it is also possible to open a bank account of the director or the dependent family, fund transfer in daily life can be done smoothly (In Malaysia, in principle it is not permitted to open personal bank account who do not have workpermit or residence permit. * It is possible in some cases to open a securities account.)|
※ Regarding open corporate bank account, work permit is not an essential condition, but some banks oblige all directors to obtain work permit, so it is necessary to pay attention to this point (If without corporate bank account, since it is impossible to settle commercial transactions, it makes no make sense to Labuan Incorporation).
3. Demerits of Labuan Work Permit
By acquiring Labuan work permit, there are the following demerits:-
|Demerits of Labuan Work Permit||· Work permit holder and who can not clear the Malaysian stay requirement of 182 days a year, the personal income tax rate will be uniform 28%.
In Malaysia’s income tax law, the 182-day rule has been adopted. If you can stay More than 182 days in Malaysia, you can regard as Tax Resident but Less than 182 days in Malaysia, you regard as Non Tax Resident.
|· Labuan work permit is originally to work in labuan island. Labuan work permit holder must establish business office in Labuan Island.|
|· Labuan work permit holder needs renewal procedures every 2 years. While Labuan work permit has the merit of being able to migrate to Malaysia for work purposes, comparing MM2H is a 10 year renewal, the procedure becomes relatively complicated relatively.|
* 1 Labuan belongs to Malaysia, but it complies with Labuan Companies law (Act. 1990) different from Malaysia Companies law (Act. 1965), and 1 country and 2 tax systems are adopted. The most famous example is similar to the relationship between mainland China and Hong Kong, Macao. Even if you obtain work permit for Hong Kong or Macao, you cannot live in Mainland China such as Beijing or Shanghai, but you can live in mainland Malaysia such as Kuala Lumpur and Johor Bahru by using Labuan work permit system. Trying to construct similar structure in other offshore jurisdictions can only live in Cayman in Cayman Islands and in Bermuda in Bermuda Islands. However, Labuan work permit can enjoy the benefits of 1 country and 2 systems, (1) “Living infrastructure is improved”, (2) “relatively safe public order”, (3) “Living in cities where prices are inexpensive compared to developed countries, it is possible this point is a distinctive feature not found in other offshore work permit.
* 2 Because privileges of permission to stay in West Malaysia granted to Labuan work permit is strictly permission to set up marketing office, Labuan authorities (LFSA) is requested to set up marketing office. In essence, kindly well understand Labuan Work Permit is to work in Labuan Island originally.
* 3 As an example, it is essential for Singapore to be a resident of 1 of the 2 directors, so when the residential director leaves Singapore, it is necessary to make another director take office or dissolve the company. Because Labuan company does not need a residential director, flexible policy is adopted such that it is possible to maintain the company without breaking the company when leaving Malaysia in the future.
* Important Notice: After the guidelines revision in February 2015, several requirements have been added to apply Labuan work permit (Ref: “Guidelines on Work Permit Application in Labuan IBFC Feb. 2015“). -> The above requirements have been partially changed due to the revised guideline in April 2019 (Ref: “Guidelines on Work Permit Application in Labuan IBFC Apr. 2019“).
* There is a possibility that it will be changed by future revision.
4. About Labuan Work Permit Submission
Kindly refer to “Labuan Work Permit Submission” on how to submit Labuan Work Permit.
5. About Labuan Work Permit Renewal
Kindly refer to “Labuan Work Permit Renewal” about how to renew Labuan Work Permit.
Should you have any queries, please do not hesitate to contact us.