Mark: 13 July 2010

The dream has ended

Today I spoke with Mr. Ahmad Kamil Mohd Yusop from the Law & Commerce Trust Ltd. Marketing Office in Kuala Lumpur. Here is what I learned:

Until recently the LOC – Labuan Offshore Company – had been a good solution for an Expat, if he did not make business with locals or invoice in RM. He did not need an office, did not need to put 350 000 (or 500 000 RM) on a bank account, did not need to have a co-director and paid only 3% company-taxes - instead of 25.

And the LOC was a guarantee to get a work permit which normally meant a 2-year visa. This dream is over.

Since February 2010 all the new applications for LOCs were frozen – and only in June this year it became clear what the new regulations and requirements were to get an LOC.

In short it goes as follows:
You can get an LOC if you live and work in Labuan.

You can get an LOC if you work in KL and have ALSO an office in Labuan.
You will pay RM 5000.00 extra for this ‘Service Office in KL’ per year.

Same if you work in Johor Bahru.

And that’s it. No other place is allowed.

It might be, that in future there will be an office service in Labuan, where you can – for a few hundred RMs - rent an office space and the service to get emails and faxes forwarded and have a postal and phone service.
But this would still require that you live and work either in KL or JB.

If you live in Langkawi – there is practically no possibility anymore to have an LOC.

The question of course arises, what will happen to the people who live in Langkawi and do have an LOC and have a work permit because of that, which allows them to stay here.

The answer is simple and frightening: the moment their work permit expires, they have to show an office in Labuan and live there, or an office in Labuan and one in KL or JB and make it plausible that they will work there. If not their work permit will not be renewed.

There are about 2 dozen Expats on Langkawi with LOC’s.
Of these some 40% ca. have already decided that they will apply for an SDN. BHD. Company.
Few are still undecided – and the rest will either try to live on a tourist visa (not recommended) or leave the country.

Those who want to go for a SDN. BHD. will be helped by Mr. Ahmad to do so.


Summary of circular by the Labuan FSA on application for work permit for expatriates working in Labuan companies 

1)      Work permits issued by the Immigration Department of Labuan is to allow foreigners to work for Labuan companies in Labuan and not for any other purpose.

2)      Nevertheless, expatriates are allowed to work in Kuala Lumpur and Johor Bahru (whichever applicable) subject to the approval from Labuan FSA under the "Guidelines for the Establishment of Marketing Office" dated 14 November 2003 or "Guideline on Co-location of Labuan Holding Company" dated 1 June 2009 (both Guidelines hereinafter referred to as the "Guidelines").

Based on the above, effective immediately, all applications for work permits shall fulfill three main criteria as established by the Immigration Department apart from the other requirements under the circulated checklist. The three main criteria are as follows:

(i)               Name of Applicant;

(ii)              Designation/Position of the applicant; and

(iii)             Address of work place

With regard to the address of workplace, the applicants must provide the address of his/her place of work which is not the address of a Labuan trust company. Any application which stated the employer's address as a Labuan trust company will not be considered. This would mean having your own independent office in Labuan.

In the case where the address is in Labuan, the Labuan FSA may consider residential address as the place of business. However, applicants who purposely provide a workplace address in Labuan but reside in other parts of Malaysia will not be approved.

For those who are proposing to work in Kuala Lumpur or Johor Bahru, in addition to having his  own office in Labuan, the applicants must have marketing offices in KL or JB and the marketing offices also comply with the requirement under the Guidelines. These include seeking prior approval from Labuan FSA and establish an office either in Kuala Lumpur or Johor Bahru which is not a residential address.

Applications to establish any office, operations or workplace in other parts of Malaysia do not fall under the Guidelines. Therefore, the application for such work permit should be submitted directly to the Immigration Department in Kuala Lumpur.

The Labuan FSA advise all applicants to provide complete and true information in the application for work permits.

Please also be informed that all applications for work permits that have been submitted to Labuan FSA prior to the issuance of this circular are not subject to the above requirements and will be processed accordingly. However, any application thereafter for renewal of all work permits shall comply with the circular.