When comparing the Indonesian yayasan and the Labuan foundation, the most striking difference is that the yayasan has an object or purpose for which its assets must be used. The Labuan foundation ultimately works for beneficiaries. In other words, the yayasan is a more abstract entity, while the Labuan foundation has been created as an asset-management structure for investors.
Both structures have limited liability and own their assets. However, only the Labuan foundation can be controlled directly or indirectly by the contributor of the funds. The founder of an Indonesian yayasan has no further role in the entity after its creation.
The Labuan foundation seems much more flexible and easier to create and manage. Clearly the designers of the structure have looked at certain aspects of the Anglo-Saxon trust and other modern foundations. Many clients using these structures like the flexibility they offer and the fact that the founder can retain control of the investments - i.e. decisions taken at the outset can be revisited.
The Indonesian yayasan is less flexible. Once assets have been contributed, they must be used to achieve the objects of the yayasan. From a legal and tax point of view, the Labuan foundation can leave 'management and control' with the founder, which in many jurisdictions is a reason to look through the structure. Naturally the protection - that the assets are in the foundation - prima facie is there and the creditor (tax inspector) must prove that the structure is a mere charade.
The Indonesian yayasan does not allow the founder to withdraw their investment in the yayasan or to make a different investment choice: the founder loses management and control. Consequently, it is much more difficult for creditors to attack the structure, except if they use the so-called' actio pauliana'. This is an action created under Roman law whereby a creditor can demand reversal of a non-contractual payment (such as a gift) on the grounds that it has been made with the intention to damage the interests of the creditor. The evidential burden is on the person making the claim, except in certain situations, such as bankruptcy.
The Indonesian yayasan is stronger from an asset-protection point of view. The Labuan foundation is more flexible and, therefore, more attractive for the many investors who would like to place their assets in a structure with the option of retaining control of the investments.
The Labuan foundation is easier to 'sell' to clients who, very often, like the idea of creating such a structure but do not really want to lose management and control. The Indonesian yayasan does not offer that possibility. In practice, clients can get their money back but only when they are paid a pension or benefit. In the meantime - i.e. between making the contribution and receiving the benefit - they no longer have management and controL Many clients may not like that but in the end they have to choose between full asset protection and a (temporary) loss of control, and the flexibility offered by the Labuan foundation.