Over the last 25 years, Labuan IBFC has developed and strengthened its position as a leading business and financial centre in Asia Pacific, striking the ideal balance between client confidentiality and compliance with international best standards and practices.
Labuan Financial Services Authority (“Labuan FSA”), the regulator of Labuan IBFC, has enforcing a modern and internationally-recognised legal framework with simple and attractive tax system to this jurisdiction.
Its business-friendly environment allows Labuan IBFC offers a plethora of wealth creation and preservation structures in conventional and Islamic forms. These comprehensive private wealth management vehicles range from common law trusts to civil law foundations.
What are Labuan Foundations?
A Labuan Foundation is governed by the Labuan Foundations Act 2010. The foundation structure is a corporate body with a separate legal entity, established to manage its own property for any lawful purpose, be it for charitable or non-charitable purposes.
It provides a strong statutory firewall that protects the foundation with clarity in its functioning. As a separate legal entity itself, the foundation is distinct from its founder, officers, and council.
The features of the foundation provides a channel for wealth planning and inheritance management protected within a tax-efficient legal entity. There is no minimum initial asset required for its establishment and the foundation can exist for a fixed or perpetual duration.
Types of Trust in Labuan IBFC
There are three general types of trust structures commonly offers by Labuan IBFC as below:
Charitable Trust
A charitable trust may be created for a wide variety of philanthropic purposes including relief and eradication of poverty, advancement of education, promotion of art, science and religion, advancement of human rights and fundamental freedom.
Purpose Trust
A purpose trust has no beneficiaries, instead it exists for the advancement of a charitable or non-charitable purpose of some kind. It may also be set up for a specific purpose or objective or a person.
Special Trust
The Labuan Special trust is ideal for succession planning. It enables a trust of company shares to be established under which the shares can be retained indefinitely and the management of the company may be carried out by its directors without any powers of intervention by the trustee.
This form of trust is ideal for succession or dynastic planning as well as for matrimonial settlements.
Labuan Private Trust Company?
A Labuan Private Trust Company, is also a separate legal entity and is established via the Labuan Financial Services and Securities Act 2010 (LFSSA) and registered with the Labuan FSA. The trust company is permitted to provide all trust company services accorded to LFSSA.
High net worth individuals would find Labuan IBFC a well-regulated yet business-friendly location for a wide range of private wealth management vehicles.
In addition, the availability of Private Trust Companies will appeal to individuals and families who wish to retain control of the management of assets and businesses, including the flexibility to be involved in the day-to-day administration of those assets.
Malaysian and non-Malaysian residents who own international as well as Malaysian properties may inject them into the trust or a foundation; however where Malaysian properties are involved, prior approval from Labuan FSA is required.
A family office can also be established via the Labuan Private Trust Company or Labuan foundation, attributing to the uniqueness of Labuan IBFC being a jurisdiction that can offer a flexible yet well-regulated and cost-efficient environment.
In summary, both Labuan Foundation and Labuan Trust allow the founder/settlor to retain sufficient control over the affairs of the entities without compromising the validity of the foundation. They are given flexibility on the formation of the board of directors or council, comprising of family members or trusted advisors of the family. This allows both wealth management structures to be privy to the requisite knowledge of the family affairs, as well as better understand the needs of the intended beneficiaries.
Pacific Trustees Labuan Ltd – www.pacifictrustees.com
