To print this article, all you need is to be registered or login on Mondaq.com.

Labuan International Business and Financial Centre (Labuan IBFC)
is at the forefront of international cross-jurisdictional wealth
planning, offering high-net-worth individuals a plethora of wealth
creation and wealth preservation structures in both conventional
and Islamic forms.

High-net-worth individuals will find a comprehensive stable of
private wealth management vehicles on offer in Labuan IBFC ranging
from common law trusts to civil law foundations. Labuan IBFC is the
only jurisdiction in Asia that offers private foundations as a
wealth management solution.

WHAT ARE FOUNDATIONS?

A Labuan foundation, as provided by the Labuan Foundations Act
2010, 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.

Established by a founder, a typical structure for a Labuan
foundation is depicted below:

1067694a.jpg

Foundations provide a conduit for dynamic wealth transfer,
dynastic planning and inheritance management protected within a
tax-efficient legal entity.

In the case of a Labuan Islamic foundation, objectives and
operations shall comply with Shariah principles, as enshrined in
its incorporation charter and guided by Labuan IBFC’s Islamic
omnibus legislation (Labuan Islamic Financial Services and
Securities Act 2010).

COMPARISON WITH OTHER JURISDICTIONS

1067694b.jpg

GROWTH OF FOUNDATIONS IN LABUAN IBFC

1067694c.jpg

INTERESTING FACTS ABOUT LABUAN FOUNDATIONS

  • A foundation is a registered legal entity

  • As a legal entity, a foundation offers legal certainty

  • May be re-domiciled to other jurisdictions

  • May be re-domiciled from other jurisdictions

  • Provides for unenforceability of foreign claim or judgment

  • No minimum initial asset is required to set up

  • The rights and powers of a founder can be enshrined via the
    charters

  • Charitable and non-charitable foundations may hold Malaysian
    assets, with Labuan FSA’s approval

  • Arbitration is allowed

  • A corporate body is allowed to be appointed as council and
    officer

  • May exist in fixed or perpetual duration

  • May be dissolved with assets returned to a designated
    party

  • Protected by confidentiality

  • Allows reserved power by the founder

  • Allows the appointment of a supervisory person

  • Short clawback period of 2 years

  • Flexibility to evolve according to circumstances, by issuing
    articles to reflect changes

  • Need not have an independent party in the council

  • ‘Ownership’ may be transferred with protection
    intact

  • Beneficiary has no legal or beneficiary ownership over the
    foundation’s asset

FREQUENTLY ASKED QUESTIONS

Q: Can Malaysians set up a foundation?

Yes.

Q: Are there any other countries in Asia with
foundations, which act as a wealth management tool?

No, there is no other country in Asia that offers foundations as
a wealth management tool. The foundations in other Asian
jurisdictions are limited to charitable purposes, with detailed
reporting requirements.

Q: Are there any insurance-related wealth
structures?

Yes, protected cell companies and limited liability partnerships
may also be used either in conjunction with a foundation or
independently as a wealth management tool.

Q: Are foundations required to be
registered?

Yes, foundations must be registered with the regulator, Labuan
FSA.

Q: Is a foundation registered in Labuan required to have
an office in Labuan?

A Labuan foundation must maintain a registered office in Labuan.
Its address shall be the address of the secretary to the
foundation, which is a Labuan trust company.

Q: Must the council meeting be held in
Labuan?

No.

Q: Would it be possible to combine a foundation and a
trust?

Yes, one can own the other.

Q: What is the taxation rate of a Labuan foundation?

All non-trading income which includes investment holding income
is not taxable. Any trading income is taxed at 3% as provided by
the Labuan Business Activity Tax Act 1990.

Q: What is the tax implication on distributions by a
Labuan foundation?

The distributions by a Labuan foundation to its beneficiaries
are tax exempt in Labuan. The beneficiaries of the foundation will
need to satisfy their own tax liabilities in their respective
jurisdictions of tax residence.

Q: Are foundations flexible?

Yes, any changes may be incorporated in the charter to allow for
flexibility.

Q: Can a Muslim use a foundation to manage their estate
while alive?

Yes.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Wealth Management from Malaysia

Setting Up Fund Manager Or Wealth Manager In Singapore

Shook Lin & Bok

Fund/Asset or wealth management specialists who are serious and passionate about their profession want to thrive in an environment where the laws and regulations are clear, business friendly and progressive.

A Guide To International Waqf Foundation

Labuan IBFC Inc

Labuan International Business and Financial Centre (Labuan IBFC) is Asia’s only midshore jurisdiction with conventional and Islamic wealth management solutions.



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.