To enable offshore companies to benefit from the double taxation agreements signed between Malaysia and other countries, the Minister of Finance has exempted offshore companies from Section 147 of the Offshore Companies Act, 1990 to incorporate a wholly owned subsidiary under the Companies Act, 1965. The approval is subject to certain conditions being met which include :

  1. the subsidiary company can only undertake businesses outside Malaysia and is not allowed to conduct any domestic business including dealing with Malaysian residents except as allowed under Section 7(4) of the Offshore Companies Act, 1990;

  2. income remitted by the subsidiary company to its parent company in Labuan must be in foreign currency;

  3. the subsidiary company is subject to the Income Tax Act, 1967 and is required to keep business records and declare its income as required by the said Act;

  4. the offshore company is to seek LOFSA's approval prior to setting up its domestic subsidiary company.
  The Minister of Finance has revised the amount of fees to be paid to LOFSA in respect of the following via the Offshore Companies (Amendment) Regulations 1998 which was gazetted on September 17, 1998 :
    Old Fees
New Fees
a. On lodging a copy of any special resolution altering the memorandum or articles of association of an offshore company under Section 24 50 NIL
b. On lodging an annual return of a foreign offshore company 100 NIL
c. Annual fee to be paid by an offshore company 2,000 2,600
d. Annual fee to be paid by a foreign offshore company 5,000 5,300


This report is reproduced with permission from Kassim Chan Tax Services Sdn Bhd (36421-T) and Deloitte Touche Tohmatsu Tax Services Sdn Bhd (151497-P). 7th Floor, 3 Cangkat Raja Chulan 50200 Kuala Lumpur, Malaysia or P.O.Box 11151, 50736 Kuala Lumpur, Malaysia.
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