What to Know About Re-domiciliation in Malaysia
There are several criteria in selecting a location for your business. These include the cost of operation, availability of raw materials, the salary of employees, the business environment and technology, the government policies, telecommunications, taxes, good roads and transportation, etc. If you are a businessman wanting to establish a business, you’ve probably thought about these especially when you’re ready for incorporation.
But what about if things have changed? What if the president in the country where you registered your business has been replaced by a new one whose government policies and taxation system don’t favour your company? Would you relocate your business to another country? What about liquidation and the money it would cost you? Is there any other way to do it? Fortunately, we have a process called re-domiciliation.
What is Re-domiciliation?
The word domiciliation comes from domicile, which means home. Re-domiciliation in a simple context means re-home or transferring of one home from one place to another. When it’s applied to a business setting, it means de-registration from one country of jurisdiction and re-registering it to another country or jurisdiction. What would this imply? Well, there are several implications:
Liquidation as a Non-requirement
Since the business is not closing and just transferring jurisdiction, liquidation is not a requirement. Liquidation is the process of ending the accounting books of the company. It must be done if you want to close the company and open a new one. These accounting books are to be submitted for proper taxation. With liquidation, the company status will also be determined whether it is earning or experiencing bankruptcy.
Dynamic Taxation System
Most of the companies observe double taxation wherein the corporation is being taxed for its operation and the employees for their salaries. If you have a physical company in one country, let’s say, and your business is under the jurisdiction of another country as you have re-domiciled, the rule for taxation that will be applied for the corporation tax will be that one where you re-domiciled. It will be favourable for the company if it has re-domiciled in a country where the corporation tax is lesser.
Relocation of Physical Properties
This is one of the many things you have to do once you transfer your physical office from one place to another. It will take not only one day to get settled to a new company location but several days as you have to clean, arrange, and organize your stuff. With re-domiciliation, the physical location is not changed but only its jurisdiction upon re-domiciling to another country.
The company shareholders will enjoy the tax-free of their dividends. Some countries, including Malaysia, do not impose a tax on the dividends. This is one another good reason why re-domiciling is good.
Procedures of Re-domiciliation in Malaysia
There are procedures to follow to get your company re-domiciled in Malaysia through the Labuan Offshore District. The steps are easy and not that hard to follow:
- Get the Approval of Transfer from your country of origin. Not all countries are allowing re-domiciliation. As of now, there are about 50 countries offering this. If your country of origin and the country you are going to re-domicile are listed here, then, you have this privilege. There are certain people that you need to get their approval. These include government authorities regulating businesses in your country, the shareholders and creditors, and other people whom the company has business transactions.
- Follow the application process for re-domiciliation. The first thing to do in this step is to reserve and apply for the name of the company. Once it is approved, you will have 3 months to apply for the Approval in Principle for the re-domiciliation from the Labuan Financial Services Authority. You will then have another 12 months again. This time, it is for the registration of your company to become a Labuan company.
In general, the idea of re-domiciliation depends on the country where you are going to migrate jurisdiction. The company should always evaluate the pros and cons of this re-domiciliation. If you have further questions or the process is still vague to you, we at the 3E Accounting Malaysia would like to help and answer your questions.