0% tax company in Malaysia -- thoughts?

[Kakarot]

A CPA in Asia told me it's possible to form a totally tax exempt company in Malaysia --and they don't mean Labuan -- which is apparently a dead dog nowadays.

Here's the link below -- do experts here concur this is do-able? See salient weaknesses? Malaysia is a nice place, would be great if this would actually work to form an offshore business that's totally tax exempt:

http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=1&bt_posi=2&bt_unit=5000&bt_sequ=3&bt_lgv=2
just switch the language to english in top right corner and peruse and let me know thoughts.

 

[JohnLocke]

What's the point with this thread?

Actually to form a company which is tax exempted‌ is not a problem you can do it most places. You will get taxed where‍ you live in most countries so it make not much sense to start such a⁠ thread!

 

[Kakarot]

well if thats the case, why does everyone only talk about certain jurisdictions all the‌ time over and over and over?

that doesn't make sense if forming a tax exempt‍ company is possible everywhere in the world -- why aren't all the other places discussed⁠ as ideas? They aren't for some reason. Seems strange to me. Why are we always⁤ talking this small pool of locations if the whole world is possible for this?

I don't understand what the harm is here?

This forum category is all about where to⁣ form your company.

So I'm presenting malaysia as an idea -- seems perfectly apropos to⁢ me and this forum area isn't it?

 

[Kakarot]

Actually you can delete this thread. They were wrong... theres no way to form a‌ company in malaysia tax free i think.

 

[khinkali]

@Kakarot the document that you linked is about not taxing you on offshore gains if‌ you are resident. You're right, people discuss Thailand and Georgia as territorial tax jurisdictions and‍ they ignore Malaysia.

The problem (and it is the same problem in Thailand and Georgia)⁠ is that people think they can live in a territorial tax country, run a business⁤ from there and be tax free. PE or CFC rules make most of those dreams⁣ incorrect. The important thing is to read something like "income accruing in or derived from⁢ Malaysia" and realise that if you are resident in the jurisdiction then your business might︀ be considered as accruing profits locally because of your work, management or control, never mind︁ where your shell company is registered.

If your advisors said "totally tax exempt company in︂ Malaysia" while you live and work for that company in Malaysia, then I would be︃ suspicious. Very suspicious.

( by the way, Labuan is interesting for doing business )

 

[Kakarot]

thank you sir. I heard labuan WAS good, but that 3% corporate rate is gone‌ now and rules have changed.

So what about living in thailand, and having my tax‍ exempt corporation in malaysia -- or vice versa if a a corproate structure for offshore⁠ gains can be achieved with 0% tax in thailand too.

Anyone know if such a⁤ plan is possible?

I'd like to have a malaysian company, visit there once in a⁣ while, bank there -- and then live in thailand. If I can do that and⁢ have 0% corporate tax bc all my customers and in USA -- fantastic.

 

[khinkali]

Thailand doesn't tax you for owning the foreign company, but if you're‍ doing work in Thailand or managing work from Thailand then there is Thai source income.⁠ You mentioned "all my customers", so it sounds like you'd be running a Thai business,⁤ wherever it was registered.

If you are just a shareholder and don't manage or work⁣ for the business then your passive income could be tax free (depending on when you⁢ remit the income).

However, does Thailand care? Will they enforce? If you're a small fish︀ then very unlikely. The immigration cops questioned a bunch of remote workers in Chaing Mai︁ a few years ago and decided they were OK. But they're doing cheap web design︂ or blog posting. If your business is bigger or you remit a lot of money,︃ I would want to be a lot more cautious.

 

[Kakarot]

i dont do any business in thailand - i would only be living there.

All my customers are in USA. All my suppliers are in china.

I had heard as‌ long as I don't use any of my money earned in thailand in the SAME‍ year i earned it -- it's tax exempt basically. So you need to use last⁠ years earnings to pay for your living there.

Is that correct?

Id rather live in⁤ phillipines than thailand, i wonder if this kinda thing is do-able there instead?

 

[khinkali]

You would never communicate with your customers and suppliers while in‍ Thailand? You would never communicate with any staff member or freelancer while in Thailand? You⁠ are purely a passive shareholder receiving dividends or selling your shares for income? In that⁤ case, don't remit it to Thailand that year and it shouldn't be taxable (unless a⁣ Thai citizen if I remember correctly).

If you work for or manage the business from⁢ inside Thailand, then there is probably a Thai tax base. This is the same whether︀ it is your business or not. If you go to Thailand and work for or︁ manage an offshore business, then either you or that business are likely to be taxable.︂

People get confused because Thailand doesn't tax offshore income that isn't remitted that year. It's︃ not offshore if you do it in Thailand, wherever the company is based and wherever︄ you bank (PE: "permanent establishment". This differs from UK, most of EU, AU, etc. where︅ the ownership of the offshore business can also make it taxable (CFC: "controlled foreign corporation").︆ Therefore Thailand can be good for people with a passive income such as a pension︇ or dividends from companies they don't work for or manage.

 

[Silvio]

Practically all expats run︆ their offshore businesses from Thailand and I have never heard of Thai tax office asking︇ them to pay Thai tax. Doesn't mean it's fully compliant but that's how it goes︈

 

[Kakarot]

uh oh. Yes I would be running my company while living in thailand. So I‌ guess that's a problem then? Another advisor said thailand never checks these things though and‍ thusly I could easily get away with it. Anyone with experience know one way or⁠ another?

What about Laos. 0% corporate tax, 0% personal tax -- how come no one⁤ makes an company and does tax residency in laos -- i mean, maybe it sucks⁣ there? never been.

 

[Golden Fleece]

Because we are all capitalists here -- and⁠ communism is the opposite of capitalism.
https://en.wikipedia.org/wiki/Laos

 

[glengoolie]

I too am interested in Malaysia. I asked about specific setup︅ in here Cyprus company with Malaysian residence for trading? maybe you can give some input︆ on that? So far I heard that yes, it should be just fine like that.︇

 

[lavel]

As an European what you say it make sense to research your opportunities in Malaysia‌ if you don't plan to move / relocate there?

 

[seabreeze]

There's nothing wrong with Labuan. In fact, if you hit the substance requirements and basically︀ run your business outside of Labuan, 3% on Net profits in a jurisdiction with real︁ banks (gosh!) is a sweet deal.

What you are referring to is that Malaysia, including︂ companies, has a territorial tax system.
That would mean that this income will need to︃ originate from a subsidiary or permanent establishment that really generates the profit by working OUT︄ of the jurisdiction. That will obviously mean it will need to be tax resident in︅ said jurisdiction. That would mean that you're not making any tax savings unless it's a︆ real 0% jurisdiction (UAE, Caymans, Bahamas, Turks Caicos, Anguilla, BVI and a couple of others).︇ At the very least you need to have employees there and travel one-two-three times a︈ year to make strategic business decisions and document them. The only real benefit would seem︉ that you could hide a tax-free jurisdiction inside a Malaysia company, but you'd still have︊ to use the billing address of the tax free P.E. to bill your clients, so︋ it will be obvious.
Further that, you'd be pissing off Malaysian tax, you may hit︌ general anti-avoidance rules and you'll have little chance convincing a Malay CPA of taking your︍ company on with these shenanigans in mind.
It's not designed for this. Labuan is.

To comment on other aspects:

- If you run your business from a country that is︎ not the country where its registered, 99,99% it will need to be tax resident where️ you run it from. Legally, same goes for Thailand.
- The tax exemption for foreign‌ sourced profits in Thailand is exactly that: only foreign sourced profits. Plus, they need to‍ be booked and stay abroad for a year (not enough to just get paid by⁠ your client on the company, need to distribute dividends and keep on personal account). Enforcement,⁤ as others have said, is near to none, but that's something I would never stake⁣ on.
- Philippines also excludes foreign sourced income of foreigners. With less silly rules. But⁢ it still needs to be genuinely foreign sourced.

Oh, and Laos - shithole.

 

[Kakarot]

ok so what's with so many people saying Labuan is no longer offering that 3%‌ rate. I thought Labuan was a lost cause nowadays.

 

[glengoolie]

is this truly‍ sufficient to prove to authorities that the company is NOT controlled from your country of⁠ residence and avoid paying taxes where you live? sounds too good to be true. i⁤ guess this works for real companies but not one-man show umbrella companies, right?

 

[seabreeze]

That's complicated.
- CFC rules may result in a⁤ "tax-optimized" company to essentially be redundant.

- A bunch of factors may come into play⁣ when determening where the effective management of the company is: where did client meetings take⁢ place, did you propose a price to the client, who creates the value added in︀ the company and how (which work) and where do they perform this work from? How︁ many directors are there and where do they live? Do you have an active participation︂ in the Co or are you merely a shareholder?

- And there may be factors︃ that will lead your tax authorities to determine that the company has a PE in︄ your contry and is hence taxable there: did you ever answer critical emails from your︅ home country? Sign any agreements? Do you keep your company stuff at home? Etc etc︆ etc...

Generally, not a good approach for one-man shows unless your country of residence doesn't︇ care at all.