One of the main reasons why foreign investors are keen to incorporate a Labuan Offshore Company is due to the tax exemptions they can enjoy:
- No indirect tax – Labuan offshore companies enjoy free-port status. Hence, indirect taxes such as services and sales taxes are not applicable to Labuan entities located in Labuan
- Stamp duty – Stamp duty is exempted from all instruments executed by Labuan entity in connection with its business
- Exchange control – The entity is also not subject to exchange control restrictions
- Payments made by Labuan entities – The following exemptions are available to recipients of income from Labuan entities:
- Dividends received by Labuan Company
- Dividends received from Labuan Company which are paid, credited or distributed out of income derived from Labuan business activity
- Distributions received from Labuan trust by beneficiaries
- Interest received from Labuan Company by a resident person
- Withholding tax – The following payments made by Labuan entities to non-residents are exempted and not subject to withholding provisions:
- Royalties
- Interest
- Technical services, advice or assistance
- Other income