What is a Labuan trust?
A trust can be set up for a wide range of purposes ranging from discretionary, charity, spendthrift protection, etc. Labuan IBFC offers trusts (governed by common law) that can be applied in an Islamic manner as long as they subscribe to Shariah principles. Trusts are highly flexible, covering many types to suit a client’s varied needs. Labuan trusts shall not be valid unless it is created by a will or other instrument in writing, including a unilateral declaration of trust, but a unit trust shall be created only by a will or other instrument in writing.

Are trusts required to register with Labuan FSA for their set up in Labuan IBFC?
Trusts do not have to register with Labuan FSA. However, it must use a Labuan trust company as one of their trustees.

Who can set up a Labuan trust?
A resident or non-resident can do so. In the case of a non-resident, Malaysian property can be injected into a Labuan trust while a Malaysian resident can place international assets into a Labuan trust but Malaysian property requires the approval of the regulator, Labuan FSA.

What is the difference between a trust and a foundation?
Trusts and foundations are differentiated as follows:

Common law origins.
Civil law origins.
Relationship amongst parties is fiduciary.
Relationship amongst parties is contractual.
Assets, upon being vested in the trust, are legally owned by the trustee.
Assets are legally owned by the foundation. Upon registration of the foundation, the property endowed or to be endowed becomes an estate separate and apart from that of the founder by acquiring a separate legal entity status.
The person who establishes the trust is known as the settlor and the persons who benefit from the trust are known as beneficiaries.
The person(s) who creates the endowment is known as the founder and the persons who benefit from the endowment are known as beneficiaries.
The trust deed is the document that establishes the trust.
The charter is the main constituent document of a foundation. A foundation may also have articles which are a set of more detailed rules governing its administration matters.
The appointed trustee is the person responsible to hold the trust assets and administer the trust.
The council is the appointed body entrusted to carry on the business and affairs of the foundation and pursue its objects. The foundation’s officers and council are required to act in accordance with the terms of the charter and articles.
Registration of the trust is not mandatory.
Registration of the foundation is mandatory.
The settlor has certain reserved powers after establishing the trust and vesting the legal title in the trust assets to the trustee.
The foundation does not have a share capital and does not recognise shareholders. The founder does not retain or acquire any ownership rights in relation to the foundation's property. The law does recognise however, the beneficiaries or the persons in whose benefit the foundation is created, which can include the founder.
A trust can be established for any lawful purpose but a trust that is set up for a purpose must appoint an enforcer.
A foundation can be established for any lawful purpose which shall be spelt out in the charter of the foundation.

What is a Labuan special trust?
A Labuan special trust (LST) is an innovative feature of the Labuan Trusts Act 1996 (LTA) and can be used to hold shares in a Labuan holding company, which in turn may own assets. The benefit of an LST is that there is a distinct separation between the custodian role of the trustees and the management of the company which is the responsibility of the directors only. The LST can be used for succession planning, commercial purposes and matrimonial settlement.

How is a Labuan trust’s income taxed?
The rate of tax imposed is 3% of audited net profits.

What is the tax implication on the distribution by a Labuan trust?
The distributions made by a Labuan trust to the beneficiaries are tax-exempt.

What is the governing legislation for the business and operations of a Labuan trust?
A Labuan trust is governed by the Labuan Trusts Act 1996.

What are the fees payable by Labuan trusts in Labuan IBFC?
The fees payable are illustrated in the table below:

Registration Fees
Labuan trust / Labuan special trust
Renewal fee
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