jackblack

1. I am also the director of my company but for the purpose of the work permit I am the CEO and thus enjoy the 50% tax exemption on my monthly salary. As a non trading company all my profits are tax free.

2. My Labuan company is non trading and I plan to keep it that way, I have another company based in another offshore location which I use for trading, that location is also tax free. I'm pretty sure your day trading would be within the rules of the Labuan non trading investment holding company.

I can confirm for sure that this route is way simpler and cheaper than following the MM2H. But maybe you're getting a head of yourself with all this, as a European you get a 3 month tourist visa when you enter Malaysia. Why don't you come to Malaysia first and see if it's for you. I've known people stay on a tourist visa for years by just making a visa run every 3 months. As long as you're flying in and out and not causing any trouble then the immigration doesn't bother you!

teejaydee

Please don't think I am questioning your calculations, but I cannot see how setting up and maintaining two companies can be cheaper than applying for an mm2h visa. I know the FD is an opportunity cost, but the actual cost of applying for an mm2h visa can surely be no more expensive than having two companies. I know there are other benefits of having the company structure, but on a cost comparison alone, surely the mm2h route is cheaper?

Good advice. To use an old expression, there is a danger of putting the cart before the horse. I have been in Malaysia on a tourist visa for the last year, and am very glad I chose that route. As you say, it's easy to leave for a short trip every three months, and it gives plenty of time to decide if Malaysia is the right choice.

bakedbean

There is no obligation under normal circumstances to complete an annual tax return.

I think one reason for contacting the Tax Department (and it's something I may be considering in the future) is if you wish to claim Tax Residency in Malaysia. I understand that this is quite easy to do, if you are based here for more than 6 months of the year.

Why would you wish to do this? Well, if you are drawing a private pension in the UK (not state pension and not Forces) that private pension would attract UK tax. If you have Malaysian Tax Residency, you can send the notification to HMRC in the UK and they will accept that and, therefore, (I think) issue your pension Gross. Malaysia then, in turn, will not tax your pension (or indeed any other income offshore). I haven't done it yet, so it's a bit theoretical so far.

jackblack

It's not necessary to maintain 2 companies, I do so because the other is my main business and source of income. If you strip out the MM2H deposit then I would agree the Labuan route works out more expensive in the long run. However, it is a far easier process and a lot less paperwork required. No need for police checks from home country etc. The work permit is issued within a month, its just the trip to Labuan thats a hassle!

Yes, you should claim Tax Residency in Malaysia and then your pension would be paid gross. Why should you continue to pay UK tax when you don't live there??

InVinoVeritas

Doesn't it depend on whether your UK pension exceeds the nil band? I did hear rumours of them abolishing personal allowances for expats though.

One of the great things about MM2H is that after all the paperwork to get it, there is virtually none at all afterwards.

teejaydee

If anyone is contemplating obtaining a Malaysian Certificate of Residence, further information about what it is and how to obtain it can be found here:

Laman Rasmi Lembaga Hasil Dalam Negeri Malaysia

Twixy

One thing I'm concerned about with the labuan route is the short term visa. I imagine it's a 1 year renewable right? If so, does it at least open a path to permanent residency in Malaysia?

e-migrator

According to the table on Gary's website LabuanTax.com, your work permit by virtue of a Labuan company is valid throughout the company's life.

teejaydee

As jackblack stated in post #30:

The employment pass is issued for a period of 2 years and requires a visit to Labuan to have the pass put in your passport, literally it's an half an hour job! It needs to be done in person every 2 years.

It is more correct to say the work permit is potentially valid throughout the company's life, because, as jackblack pointed out in the same post:

It's important to note that the company must be seen to be doing something, not just a "shell company", otherwise it's unlikely they will renew your work permit.

e-migrator

I have asked Gary once more about the issues that jackblack had raised. His answers were quite clear:

Conditions for work permit applications and renewals: The rules have been tightened starting 1 January 2015 to combat misuse. In both cases, you now have to produce at least some form of simple business plan, financial statements or contracts. Furthermore, personal intentions will no longer suffice to justify a work permit. You need to have a business reason. Renewals have to be done every two years, and as jackblack had said, the company cannot be "sleeping".

Director vs. CEO/director's fee vs. salary: Gary says immigration just needs to be convinced you make more than MYR 5,000 per month. They do not care whether it is in the form of a salary or a director's fee. They may not even be aware of the difference. You can get a work permit as a director of your company. A Labuan company's director may be an employee of the company, but does not have to be. You can be your company's director and earn all of your income tax-free as a director's fee. No need to be a CEO, draw a salary and pay half the regular income tax rate. Some immigration agents or corporate service providers may not know about this.

Trading vs. non-trading company: Gary insists that a company that does lots of stock market trades every day is a trading company. There are mixed companies, too. In this case, you would keep two books, one for your trading and the other for your non-trading activities. Non-trading companies are entirely tax-free. Trading companies have a choice of either paying a flat tax of MYR 20,000 per year or 3% of audited profits (+ auditors' fees that are based on turnover). Since my company would be trading, I would have to make a decision, and I would prefer the latter. Why? Director's fees are deductible expenses. I would be my company's director, and my director's fee would just happen to be equal to my company's profit, so my company would make no profit at all, and the resulting tax would be 3% of zero = 0 And I can use my audited financial statements as proof of activity of my company for renewing my work permit.

Personal interview: People from FATF high risk countries, China, Bangladesh, Syria, and Nigeria will now have to be interviewed before incorporation and/or work permit renewal.