Accounting: Consulting fees from Seychelles to Labuan

[Opl48]

Hello everybody,

It's almost all in the title: I have 2 companies, one in Labuan and one in Seychelles with a nominee director. I would like to suck out the Labuan company profit using "consulting fees", but I wonder how will react the Malaysian audit company to it? Should I change the category to something else than "consulting fees"?
From this year we are requested to undergo audit and have at least 2 employees for Labuan (director included) to be under the 3% tax rate regime.

Thanks for your help!

 

[GiGoGo]

Say that the Seychelles offers CEO services to the Labuan company. Better if this is a monthly pay rather a one shot

 

[Sols]

What GiGoGo proposed will most likely work. It's a pretty standard setup. But speak with your accountant in Malaysia/Labuan first. They can guide you through this process to make sure it's compliant with local laws.

 

[fshore]

Do you live in Malaysia? You can also consider taking a salary from the labuan company to reduce the profit. The salary is not taxable in Malaysia if you don't work in Malaysia.

 

[nomad999]

How about playing with loans between the two companies to reduce or eliminate taxable profit ? Anyone familiar with this ?

 

[fshore]

How about playing with loans between the two companies to reduce or eliminate taxable profit ? Anyone familiar with this ?

A loan will not reduce the profit, only interest will.

 

[nomad999]

Do you live in Malaysia? You can also consider taking a salary from the labuan company to reduce the profit. The salary is not taxable in Malaysia if you don't work in Malaysia.

You mean not taxable if resident of labuan or malaysia ? I have been told salary for Malaysia non-resident is taxed at the highest at 28%.

Regarding loans, do you know what is the max interest rate you could take that would be allowed in labuan?

 

[fshore]

You mean not taxable if resident of labuan or malaysia ? I have been told salary for Malaysia non-resident is taxed at the highest at 28%.

Regarding loans, do you know what is the max interest rate you could take that would be allowed in labuan?

It's taxable at the highest rate if you work in Malaysia while you are non tax resident.

 

[nomad999]

It's taxable at the highest rate if you work in Malaysia while you are non tax resident.

Can you give more details on salary from labuan company not taxable to a malaysian resident ? Or did i get that wrong ?
I am aware of something along 50% reduction on salary to labuan resident, also director's fee are tax deductible for non resident but you to need to prove you are not the sole director and have employees or something like that and it must not be regular payment like a salary.

I did a bit of research on labuan but so far if there was something interesting before 2019, now i can't find anything good about it. Maybe privacy and reputation... oh and getting a bank account is easy so there is that ...

 

[JohnSeed]

oh and getting a bank account is easy so there is that ...

That's one of the major problems with most other jurisdicitions and the company formation there. So if it is that easy with a company in Labuan it is worth to setup a company there just because you can get some solid banking.

 

[fshore]

Can you give more details on salary from labuan company not taxable to a malaysian resident ? Or did i get that wrong ?
I am aware of something along 50% reduction on salary to labuan resident, also director's fee are tax deductible for non resident but you to need to prove you are not the sole director and have employees or something like that and it must not be regular payment like a salary.

I did a bit of research on labuan but so far if there was something interesting before 2019, now i can't find anything good about it. Maybe privacy and reputation... oh and getting a bank account is easy so there is that ...

You got that wrong.
Salary is taxable if you work in Malaysia. It's not taxable if you work outside Malaysia.
In addition to that, directors salary is not taxable to foreigners that are resident in Malaysia.

 

[nomad999]

I can only find this that would be related to what you said on PWC Malaysia 2019 : Income Exempt from Tax

Foreign income of any person (other than a resident company carrying on the business of banking, insurance or sea or air transport) arising from sources outside Malaysia and remitted into Malaysia.

Income from director’s fees received by a non-Malaysian citizen director of a Labuan entity (until YA 2020).

Could you put what you said in context in the case of OP assuming tax resident of Malaysia ?

 

[fshore]

If tax resident in Malaysia then he has to pay tax on the salary.

 

[nomad999]

Do you live in Malaysia? You can also consider taking a salary from the labuan company to reduce the profit. The salary is not taxable in Malaysia if you don't work in Malaysia.

I'm confusd now, what did you mean there in you initial post? Can you give an example ?
I am really interested if there is a way to get a salary without tax as labuan company director.

 

[fshore]

I'm confusd now, what did you mean there in you initial post? Can you give an example ?
I am really interested if there is a way to get a salary without tax as labuan company director.

In that post I meant if you don't live in Malaysia, you can take a tax free salary. It didn't seem to me like OP lives in Malaysia.

 

[Opl48]

Thanks for all your replies. It looks like we all have the same problems with Labuan ... hehe

I wish I had a bank account in Seychelles now. I could just send money there and that would be all...

so I have been looking for the CEO services (nice idea thanks) and I suspect it to be subject to withholding income tax? Does someone know more about it? That’s the exact reason why consulting fees don’t work in this case, they take 10% on them.

if you also have a company in Labuan feel free to contact me by mp it’s always nice to have friends in the same situation.

 

[JohnSeed]

I wish I had a bank account in Seychelles now. I could just send money there and that would be all...

Would transferwise be a solution for you? if so, you can get an account with TW for your Seychelles company, easy and cheap to setup.

 

[fshore]

Thanks for all your replies. It looks like we all have the same problems with Labuan ... hehe

I wish I had a bank account in Seychelles now. I could just send money there and that would be all...

so I have been looking for the CEO services (nice idea thanks) and I suspect it to be subject to withholding income tax? Does someone know more about it? That’s the exact reason why consulting fees don’t work in this case, they take 10% on them.

if you also have a company in Labuan feel free to contact me by mp it’s always nice to have friends in the same situation.

There is no withholding required from labuan companies

 

[Hova]

Hi Guys,

I Currently have a business in Seychelles. But 80 percent clients pay online through a broker. Will it be possible for me to send that money to a company that i will make in Lubuan?
Around 20K Euro per month. Will i be charged the 3% rate?
How will i be able to transfer the money from Lubuan Company to my personal accounts in Seychelles?

 

[Sols]

Just do a wire transfer after your Labuan company has issued an interim dividend or paid you a salary, but as per your other thread, the Labuan company is tax resident in the Seychelles and you need to comply with Seychelles tax law.