Store House Of Benefits For Chinese Investors In Labuan IBFC


Choosing a jurisdiction to invest in depends largely on an individual's personal list of criteria and guidance from his professional advisers, but increasingly, Labuan International Business and Financial Centre has been gathering momentum as a reputable IBFC for transacting international trade and investment. The bases for this evaluation are centred on Labuan's business friendly laws, a robust regulator and a highly attractive tax system founded on the following: A simple and straightforward tax system ensuring certainty in tax treatment A tax system complemented by laws to eliminate 'friction' . Hence, there is no exchange control, no transfer taxes, no withholding tax and no indirect taxes that may be barriers to international transactions. Access to the majority of Malaysia's extensive double taxation treaty network that currently stands at 75. To illustrate the simplicity of the tax system: a Labuan company receiving passive income pays 0% tax, while an active, trading business never pays tax greater than USD6,000 annually. What is worth noting is that – regardless of the amount of operational substance the Labuan company has – Labuan IBFC tax outcomes do not change. In other words, a lightly managed Labuan company is taxed in exactly the same manner as another company which has extensive operational substance. This flexibility goes far to strike the right balance between the substance requirements of the investor's home location and that of Labuan IBFC. These attributes place Labuan very favourably as an excellent location to conduct international transactions from holding of investments, fund management, financing, leasing, brands, shipping and trading to mention a few. The Labuan IBFC edge with Taiwan and China An instance where Labuan IBFC can play a pivotal role in the business relationship between Taiwan and China is demonstrated here. Taiwan recently announced that it will allow Chinese investment in 100 of its industry sectors. However, Taiwan has high direct and withholding tax rates, making sense for foreign investment into Taiwan to be involved via a country that has a good tax treaty with Taiwan. Without a tax treaty, the withholding tax on finance costs to acquire the Taiwanese investment and payable to a non-resident can range from 15% to 20%. The return on investment in the form of dividends is also subject to 20% withholding tax, and any capital gains made on exit from Taiwan is subject to 20% tax. For the Chinese investor...

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