Establishment of Marketing Office
The role of the Marketing Office (the representative office) is limited to facilitate meetings with clients and establish contacts with potential clients of the Labuan company. No maintenance of books and records (including trading activities) shall be done through, from or in the Marketing Office.
All Labuan companies, including those licensed under the laws relating to financial services in Labuan IBFC may apply to set up a Marketing Office in Kuala Lumpur and/or Iskandar Malaysia. Labuan companies that have an existing Kuala Lumpur Marketing Office may apply to establish another Marketing Office in Iskandar Malaysia. With the exception of insurance brokers and captives, all Labuan companies that have a Marketing Office are required to maintain a Management Office in Labuan.
Tax position of marketing office
Generally saying, the representative office is allowed only limited activities such as “Advertising / Promotion”, “Market Research”, “Goods Storage”, and trading activity is prohibited. Therefore, it is not considered a PE (permanent establishment) in the country / region, and is generally not subject to tax.
Those who have obtained Labuan Work Permit and moved to West Malaysia (Kuala Lumpur, Johor Bahru, etc.) are expected to establish a marketing office.
In order to establish a “Marketing Office”, it is stipulated that a “Management Office” must be established on Labuan Island.
In order to open a marketing office, it is necessary to submit an application to the Labuan Financial Services Authority (Labuan FSA) through secretary company (Bona Trust Corporation).
Below is an overview of the marketing office:-
|1. Role and purpose of marketing office|
|The marketing office is just a “system to facilitate smooth meetings with clients (potential customers)” and is limited to activities that approach clients.|
Therefore, it is stipulated that any activity (including business transactions) such as book creation and transaction recording should not be performed inside the marketing office.
|2. Operation Requirement|
|Address||The Marketing Office must have an address.|
The Marketing Office must be segregated and independent from office of other entity/company and has its own phone line, fax machine and computer terminal separate from other entity/company.
|Staff||The number of staff in each of the Marketing Office should not exceed four.|
|Name and Signboard||The name of the Labuan company must be easily legible in Romanised characters, printed on a signboard affixed at the entrance of the Marketing Office.|
The signboard must contain the company’s name, incorporation/ registration number and licensed number (if applicable).
|3. Government registration fee|
|An application to establish a marketing office is approved by the Labuan Financial Authority (LFSA) and is valid until December 31 of the year. An annual fee must be paid to each marketing office. The annual membership fee for the following year and beyond is stipulated to be paid to the Labuan Financial Services Authority before January 15 of each calendar year.|
|Processing fee for Labuan licensed entity||MYR1,000|
|Processing fee for Labuan companies||MYR300|
|Marketing office maintenance costs||MYR7,500/year|
|4. Requirements for submission|
|・Information about Labuan Comapany (Entity)|
|・Business plan that illustrates the activities to be performed at Marketing Office, including 3 years financial projection (statement of comprehensive income and statement of financial position) of the Marketing Office.|
|・Organisation Chart of the Marketing Office.|
|※Labuan FSA reserves the right to revoke the approval due to non-compliance with Labuan FSA’s and other regulatory requirements.|
Our view of the marketing office
Labuan companies are able to carry out some activities only in cities in West Malaysia, though limited by the establishment of marketing offices. Cases where legal activities in the onshore region are permitted despite being an offshore corporation are specific to Labuan companies.
However, as mentioned above, the setting up of the marketing office is limited to meetings with clients. On the other hand, considering the operation and maintenance costs after installation, annual government registration fees, etc., is there is a need to consider whether it is cost effective.
Unfortunately, we do not recommend using Labuan for those who are considering business activities in Malaysia. In such cases, it is recommended that a Malaysian company be established and used.
* The practical rules for the above are slightly different. Kindly contact us for information in detail on how to use the Labuan Work Permit.
※ The Guidelines shall come into effect on 5 March 2014 and would remain to be effective and applicable unless otherwise amended or revoked. The Guidelines would supersede the Guidelines for Establishment of Marketing Office in Kuala Lumpur and Johor Bahru issued on 14 November 2003.
Should you have any queries, please do not hesitate to contact us.