Differnces between offshore & onshore

REGULATION

The scope of the act is the regulation, supervising financials system or amendment system and
others related to the financial system. Bank Negara will regulate and supervise all the financial
institutions insurance companies’ ad so on. More involve in general publics. AFA, supervise
regulating money market and exchange market. Fsa 2013, scope is very general, the regulations are
very general long as it can ensure that there will be the overall financial market in the country. Other
the other hand, the regulation is very strict, all angle will be cover into the regulation in terms of
sections board of director or key management team, they requirement of reporting. It needs to be
reported to the central bank Negara, its very2 detail. Fsa 2013, exclude the securities in exchange
under the security commission of Malaysia, it not cover in bank Negara. Ibfc, the regulation is more
specific the cover all the financial intermediaries and financial instrument and all financial
organization, involve in financial system excluded in the ibfc act. It’s all stated in ibfc services act, in
term of act, the act is very specific like in terms of services. They also include of establishment of
exchange of money market, capital market, just like the bursa Malaysia.

TAXATION

Difference in ofc and onshore… So in offshore they offer preferential tax payment. Onshore tax is
considered as non- preferential perpetual tax, there is no special treatment. Offshore act as
preferential treatment. The users of ofc, no need to submit the tax declaration, so at the year
companies who prepare the annual tax reporting have to submit to supervisor. It’s not a required as
compare to onshore, there is no perpetual treatment and the tax rate chargeable in onshore is very
high, so we have a very corporate tax rate and personal tax rate. Onshore, the tax has been
deducted from the income, bank need to pay interest, asset management companies need to pay
dividend. The need to keep aside the amount. Onshore is a compulsory to submit the tax, as long as
you earning some income in the domestic and they have to submit their annual declarations/annual
taxations, if you fail to submit there will be penalty. There will be overdue tax rate.

REPORTING

Financial services act 2013 (FSA), Sec 63 – 65 the regulation provide information by the transparency
requirement related to the reporting activities of the transactions. Sec 67 – 73, they provide
requirement to the auditors, auditors duties, the monitoring techniques and auditors need to
compile the requirement of the audit report by the bank. FSA is about requirements of the reporting
and when it need to be submitted, normally bank need to submit semiannual and annual report in
detail information. Labuan Act 2012, the reporting requirement is only applicable on financial
institution that involve with general public where they collect funds from the general public, they
need to declare and submit their annual reporting, the report needs to be submitted, and they no
need to provide the report in detail, it can be a brief report, no notes to account not like the
domestic, where everything has notes to account. Offshore is not compulsory to submit full detail
report. A brief report can do. Some financial institution who not involved in general public, can
submit the report but in voluntary submission. It’s not compulsory.

EXCHANGE CONTROL COMPLAINCE

There are no exchange control regulations in offshore f.c. no need to compile with any exchange
control requirement. So, we can bring the money or put in the money in the offshore investment
account and also can take out the money. There is no restriction, there will be free flow of money.
They don’t have to get any approval to get in money or take out. Onshore, everything foreign
transaction or international trade transaction, need to refer to the exchange control whether there
is restriction under the action control regulation. It is not easily can bring in money or take out
money in the exchange control regulation. There will be some requirements, or we need to get
approval from the controller exchange or banks are impower to approve some transaction. there will
be limits also in terms of the money to bring in or take out. There will be restriction of inflow and
outflow of money. Banks need documentation evident before they can approve the transaction to
come in the country. Malaysian control is not applicable to IBFC. We can bring in the money and put
in the money in the offshore investment with no restriction, if free flow money. Every foreign
transaction or international trade transaction refer to the exchange control whether there is
restriction of offshore regulation. But, for domestic we need to get approval to make payment or
received, we need to provide documentation for evidence. Even we borrow loans from overseas,
because we conclude the bills, we need to get approval from bank Negara to make the money come
to our country. If not approved by the bank Negara we cannot bring the money. For each approval
there will be a code for each approval, so when we want to make payment, we need to state the
code. if its approve, they will give a code, so to make a payment we need to give the code. It will be
easier for the bank to release the payment.

INCORPORATIONS

Setting up companies on domestic. To register a company in onshore, we go through the registrar of

companies, company commissions of Malaysia, you need to get the approval or license to run
business in domestic. So, we can get access through online, but we need to make enquiry and get
their permission to submit our application. Then, the various document needs to attach to support
tour documents. We need to get consent from other department s and ministry like set up a
financial institution, business relate to the financial sector, we need to get the consent from the
ministry of finance, bank negara, securities commission before we can submit our application. Inside
the application, they will ask the nature of business. Bank negara, security commission will see first,
we need to meet the ministry requirements and besides that we need to provide details regard the
shareholders for the company or enterprise. How much we need to authorize capital and paid-up
capital, we need to provide details about board of directors or if partnership, partnership names. We
need to provide detail information. The name of the company, we need to prior consent from the
registrar of companies, whether we can use the name or not. It will take time. A longer process
needed, cannot get immediate approval. Need to state minimum capital requirement or paid-up
capital. Need to prepare annual report or annual return every year and need to submit to so many
offices like bank Negara, auditors and so on. Offshore, the application register done online the
requirement is not in detail as in onshore. They dont have to various approvals from different
department. They must need to submit application directly to the register. No need any approval.
There is only one place we need to apply no matter we want to register a company in a financial
sector. There is no need any supporting document, no need details od board of directors, capital. So,
it is easier and faster with 48 hours we can get the approval from the supervisors or regulators from
the offshore center. The regulator and supervisors are the sole people in offshore. Although the
course incorporation if higher than onshore, but we can save our course in setting up the company,
we don’t have prepare a lot of the documents. no need any accounts or secrecy to prepare the
documents so, less fees.
OPERATIONS

Offshore companies are not requiring setting up physical office because there is no physical
presence. Its exemption to location. The benefits of going to office, we can save rentals ,
maintenance, utilities, or operation in the company. In ofc, besides the premises, we save manpower
expenses, we dont hse to place many people in ofc. But how they going t function? If their enquiry
who is going to answer? So, to solve that, all ofc need to engage in trust companies, so normally, the
activities of the ofc are handle by the domestic executive. For example, we have fund management
company in Melaka, we running in Melaka, now we set up another company in ofc assuming in
Cameron highland, now who’s going to operate that? The one is going to look after is done by the
management team in domestic like the executive in Melaka who keeping the records of the
transactions. The staff will be handling two parts on offshore and onshore; the company will pay
allowance who handling two parts. For the domestic activities and offshore activities. Pay for the
allowance that will be recorded in ofc records. The employees need to declare from the domestic.
Onshore have any tax from the salary. Employees no tax. It saves manpower expenses. We don’t
have to report the place of business, its anywhere in the world, there is no specific place, only need
register address but no physical office. They will us the trust company address as register address.
Offshore companies include those oil companies, under the ofc act whoever want to register
companied in ofc, they need to engage services of the trust company to act on behave. Offshore
companies who record their business activities, all those information’s-like transactions and financial
position of the company, is not being expose to other parties including the regulator and
supervisors, all activities are confidentially. That’s on the offshore. Onshore we need to have
registered address, we need to report the place of business, both can be same address. Some use
the company secretary as company address. Onshore need to have physical office. Domestic
company used to monitor inspection by various goverment agency like the company commission to
inspect the record. Inland also the same to check assessment, licensing status and so on. Its
compulsory for domestic to update their place of business. This domestic companies, hey have a
various reporting reequipment they have to submit annual report financial report, any changes in
board of director or shareholding needed to provide. Public listed company, they also need to
submit the report to the securities commission, an published the information to publish their
financial position and transaction well be known to publics. Less privacy inshore. To renew the
license, we need to submit application for renewal.