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Labuan offshore companies enjoy dual residencies namely, as a resident for tax purpose and a non-resident for the Malaysian Exchange Control purpose. This is very unique and the non-resident status enables a Labuan company to open foreign currency accounts with any banks and may remit and receive foreign currencies liberally. As soon as an offshore company is registered, a request is sent by the Registrar to Bank Negara Malaysia for a declaration of non-resident status. Normally this declaration is obtained within 2-3 weeks after incorporation. This declaration states that a particular offshore company is a non-resident for foreign exchange administration purpose subject to the conditions that the company:
a) complies with the provisions stipulated in the Exchange Control Notice ECM 15 pertaining to Labuan International Business and Financial Centre, and b) shall not undertake any transaction with the residents of, or deal in the currency of Israel without the permission of the Controller of Foreign Exchange.
Pursuant to the Controller’s permission to an offshore company to:
a) open one or more external accounts in Malaysia solely for the purpose of defraying its administrative and statutory expenses including granting of loan to staff; subject to the requirement that the External Account is to be funded by receipt from resident arising from the sale of foreign currencies or proceeds of credit facilities in RM as permitted in ECM6; b) open one or more foreign currency accounts in and outside of Malaysia; c) buy, borrow, lend or sell foreign currency from an authorised dealer, a Tier-1 merchant bank, a licensed offshore bank or any non-resident.
An offshore company is not permitted to;
a) accept deposits in Ringgit from any resident or non-resident; b) extend or raise any credit facility in Ringgit on behalf of resident or non-resident, other than extension of Ringgit credit facilities to their staff; c) open any Ringgit account except for defraying administrative and statutory expenses; and d) obtain credit facilities in Ringgit from any resident other than permitted in ECM 6.
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