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Asia’s best kept secret

Today I found out first hand how much Chinese are looking to avoid taxes.

I attended a conference today sponsored by the government of Labuan, Malaysia at the Grand Hyatt here in Shanghai.  Labuan is Asia’s newest financial center, and the government there is heavily courting wealthy Chinese investors and businesses to migrate their capital.

There are a lot of rich Chinese businessmen who are looking for a way to reduce their tax burden, and most don’t have a clue where to begin. This conference was a significant step in educating high net worth individuals, as well as their advisers, on the advantages of proper offshore planning.

Christine Verone, my local contact and old friend here in Shanghai, pulled some strings to score us some tickets. We were nearly the only white people at the conference… but her insider connections have paid off because the contacts I could turn out to be priceless.

img00189 20090910 1511 Asias best kept secret

Labuan’s key principals gave presentation after presentation, highlighting the benefits and advantages of doing business there. Christine and I were able to meet with many of them in a more intimate setting after the conference to get the real scoop on how things work.

Quick overview: Labuan is a federal territory of Malaysia– essentially an independent state with its own laws but protected by the sovereignty of Malaysia… replete with access to the double taxation agreements (69 of them), common law standards, and easy access to Asia’s key markets.

Naturally, like most other low tax jurisdictions, Labuan levies essentially no tax for most companies with non-Malaysian sourced income… no income tax, no stamp duties, no withholding tax, no dividend tax, no service fees, etc. Even salaries paid to company directors are not taxable in Labuan.

Consequently, the jurisdiction is becoming more popular with Asian businesses. For example, Air Asia, one of Asia’s low cost carriers, bases its operations in Labuan.  According to the company CEO, this decision saves the airline millions of dollars each year and affords it the opportunity to keep fares low and stay competitive.

But this is all standard stuff for low-tax jurisdictions. Labuan excels in other areas, and this is why you should really care:

– ANYONE can open a bank/brokerage account there, and the process is incredibly simple and transparent. In the time it takes you to open an account in Hong Kong, you can probably open 100 accounts in Labuan. Nearly every sophisticated banking institution in the world now has a branch in Labuan, and they have actual professional bankers staffing the branches, unlike Seychelles, Cayman Islands, etc. where you get a bunch of ninnies in monkey suits.

– Labuan is part of Malaysia. Malaysia is a Muslim country in Asia. This puts Labuan effectively under both the Chinese umbrella and the Middle East umbrella, making it extraordinarily easy to raise money and providing geopolitical independence that other low-tax jurisdictions do not have.

– Unlike other ‘name plate’ jurisdictions like BVI where lawyers churn out companies simply to avoid taxes, Labuan incorporation agencies provide a full suite of cost-effective back office services to fully staff operations with qualified employees.

– Brokerages set up through Labuan trust accounts provide access to all of Asia’s financial markets with nearly unbreakable protection against creditors.  Setup costs are roughly 1/3 as much as Hong Kong.

– Like Singapore, raising money for start-ups is much easier in Labuan than other jurisdictions because of the availability of capital. Banks are awash with money, and structuring a tax-advantageous fund is a relatively uncomplex procedure there.

Based on the contacts that we made today, I will be having further discussions with many key principals in Labuan to explore the full range of services that these lawyers, trust companies, and private bankers offer.  In my opinion, for anyone with significant international operations, Labuan is definitely worth looking into.

More to follow.

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

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About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Comments on this entry are closed.

  • T Crown

    Simon,

    I have been hearing a lot lately about Labuan – but no one has delivered any contacts on it in regards to banking, entities, contacts, etc.

    Would be nice if you could put some together.

    T Crown

  • Michael

    Hi Simon,
    Yes, I am interested in service providers in Labuan, Singapore, and Hong Kong.
    Regards

    • Mahesh

      Michael,

      Singapore is far better option than the other ones you mentioned. Being a Singaporean and well travelled in the world, I reckon I have earned it to draw a comparison.

      So far, I have worked in the USA, Mexico, Chile, Netherlands, Switzerland, Saudi Arabia, India, China, Thailand, Hong Kong and of course, Singapore.

      The maturity of legal system here is comparable to USA. There is no other place in Asia you can claim to come even close of 50% of it.

      Mahesh

      • Stefan

        Mahesh,

        I got an account at DBS but they do not give any information about bankruptcy protection. Do you know about it? Do you prefer other Sing banks? Any idea for a safe deposite box in Sing?
        Stefan

      • Lawrence.

        Recently, I took a Canadian friend to Singapore to open a personal bank account there and bank after bank after bank refused to let the person open an account. Even though banks like DBS offer accounts to non residents on their website, and even said they could do it on the phone, they all said no just as a matter of policy.  It seems like a policy change to only allow accounts to be opened by people with addresses in Singapore.

  • francesco

    Yes, it is interesting. Hasn’t Malaysia blocked all foreign money inside the country a few years ago? It was after the Asian crisis. Did that block affect Labuan as well?

    It would be a major problem to use a banking center that blocks your money when you most need it.

  • offshore biz

    Hi Simon. Definitely interested in service providers. Labuan sounds very offshore business friendly. I would be particularly interested in any local brokerages that offer decent online futures trading platforms. It can be frustrating as a US citizen when I want to partner with non-US partners. If we look at a US LLC structure or something similar, the non-US folks are often dragged into the American tax net even if they are not US persons and live in jurisdictions that have no tax. The joy of effectively connected income.
    Thanks for scoping out Asia for all of us. I look forward to my “Simon” update every day. Please feel free to email me any info you feel appropriate. Best regards!

    • Alexander

      Hi have you tried dong business with some one in a tax free haven like the Bahamas. The process is very different. Hit me up on the email.

  • Larry Ortega

    Dear Simon:

    I’ve got an offshore hedge fund that is formed around Peak Oil. Do you think that you and Christine might have contacts that would be interested in deep value energy investments?

    We are looking for someone to team with us in Asia. Would you be interested?

    Feel free to contact me anytime.

    • Mahesh

      Hi Larry, I figure we could talk

  • freedomoffshore-dot-com

    Simon:

    Did you come across any bank in Labuan that would allow a person or company abroad to open up an account by correspondence without a personal visit?

    I already have a thoroughly checked out offshore services provider in Labuan but if you knew of a bank there that would not require a personal visit to open up a personal or company account then I believe that is something your subscribers could benefit from.

    In much prosperity, FREEDOM

  • TEH

    Sounds like we need a Black Paper on Labuan too. I’d like to hear more about trust companies and banking/brokerage.

  • Chumbawamba

    Ditto what freedomoffshore-dot-com asked ;)

  • NHB

    Amazing your comment on the Cayman Islands those people are competent and professional and we don’t consider them ninnies in suits, what a unfair piece of reporting you are doing

    • CaribFinance

      actually mr. black i agree with your opinion entirely; Cayman is just a pawn of the US government and its bankers simply instruments of the interna l revenue svc. i jumped from DR to cayman to bvi and now looking into lauban very seriously. Can you recommend a good trust co?

  • santosh

    try mauritius island.similar facilities to labuan.
    see mcb.co.mu

  • tws

    Prospects in Labuan appear to be very interesting at the very least. It does sound like a few other unknown places around the globe. Send any and all information to me and in return let me know what you would like to advertise.

    Best regards,

  • Pingback: The WhistleBlowers | BABAK ZANJANI + GLOBAL BANKS ON 36 SQ MILE ISLAND CALLED LABUAN()

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