Labuan Foundation Set up and Management Service

Bona Trust Corporation provides Labuan Foundation set up and management services.

Labuan Foundation refers to an offshore foundation can be set up on the Labuan Island Special Economic Zone in East Malaysia.

Labuan Foundation


Labuan Foundation is recommended for the following people

Labuan foundation is mainly utilised by various wealthy individuals and their families, NPOs (Nonprofit Organisations), etc. for various purposes.

Purpose of Labuan Foundation
· Creation and accumulation of wealth and asset succession planYou can inherit the wealth and value of the family to the next generation
· Strong asset protection and robust confidentialityIf assets are properly set up, you can strongly protect assets from creditors or other claimants
· Integration and management of assetsYou can integrate and manage cross-border assets and beneficiaries
· Optimal operation and allocation planning of accumulated assetsYou can control how the beneficiary receives assets
· Evasion effect of the prover (procurement procedure)It is possible to efficiently allocate assets to heirs without avoiding the probation, without payment of court costs, delay, etc.

Advantages of the Labuan Foundation

The main advantages of Labuan Foundation are as follows:-

Advantages of the Labuan Foundation
Capital and property requirementLabuan Foundation does not have the concept of capital requirements, it can be created from 1 US dollar.
Legal statusLabuan Foundation has a juridical personality and can hold bank accounts and possess movable property / real estate under the name of the foundation. The Foundation can also become a shareholder of another company.
ConfidentialityLabuan Foundation will ensure robust confidentiality and anonymity, and information on the Foundation will not be disclosed to the outside.
DurationLabuan Foundation can have a lifetime indefinitely.
AssetLabuan Foundation does not retain the founder’s share, it has the effect of avoiding the probate (inheritance procedure is unnecessary).
Management authority of the founderThe founder of Labuan Foundation can continue to keep the Foundation under its own command and supervision by appointing him / herself as the Foundation’s director.
Claim from creditorsThe founder of Labuan Foundation will not have any interest, the assets donated to the Foundation will be completely separated from his / her own assets (bankruptcy quarantine function).
TaxDistribution of Labuan Foundation to beneficiaries will be tax exempted in Labuan.

* Beneficiaries need to meet their tax liabilities at their tax residence country.


Tax incentive measures of Labuan Foundation

The tax incentive measures of Labuan foundation corporation are as follows:-

Corporate tax of Labuan Foundation (aimed at asset preservation)
Tax rate0%
Accounting auditNo

Labuan Foundation aiming for asset management and asset preservation will be exempt tax. However, as with General Trading Company, kindly be aware that tax is levied as follows, only when you conduct business activities under the name of the Foundation.

Corporate tax of the Labuan Foundation (aimed at business activities)
Tax rate3%
Accounting auditYes

* If you have a plan to do business at the Labuan Foundation, we recommend establishing a Labuan general corporation with the Labuan Foundation as 100% shareholder, and conducting business activities at the general corporation side.


Overview and main features of the Labuan Foundation

Overview of Labuan Foundation

Note : Once the asset has been relocated, it will be legally owned by the Foundation. The founder acts as a director of the foundation (Council Member) at the request, and it is possible to keep assets and operations under command and supervision of him / herself.

• Founder・・・Person or entity who is individual or corporation and charter subscriber
• Beneficiaries・・・Person or entity who have vested interests in the foundation’s assets
• Supervisory Person / Protector・・・Person or entity who monitor the actions of the Board and protect the foundation’s work
• Council Member・・・Person or entity who ensure compliance with the foundation and officers
• Officer ・・・Person or entity who manage foundations to achieve the foundation’s purpose
• Secretary・・・Person or entity who act as a secretary of the Foundation and have a substitute function

Founder

* Compulsory

* This position equivalent to Company’s Director

  • Compulsory appointment
  • Minimum One (1), either natural person or corporate entity
  • May be residents or non-residents of Malaysia
  • May also be one of the beneficiaries
Beneficiaries

* Compulsory

* This position equivalent to Company’s Shareholder

  • Compulsory appointment
  • May include individuals, corporate entities, class of beneficiaries or charities and are those who have vested interest in assets of the foundation
  • May be residents or non-residents of Malaysia
Officer

* Compulsory

* This position equivalent to Company’s Manager

  • Compulsory appointment
  • Minimum One (1), either natural person or corporate entity
  • May be residents or non-residents of Malaysia
  • Founder or Beneficiary may be appointed as Officer (but not be a council member at the same time)
  • Duties are inter alia to ensure proper administration of the foundation and to carry out decisions of the Council
Council Members

* Optional

* This position equivalent to Company’s Board of Directors

  • Not a compulsory appointment, at the discretion of the Founder (unless foundation that solicits donation from the public)
  • May be either natural person or corporate entity
  • May be residents or non-residents of Malaysia
  • Cannot act as Officer at the same time
  • Council is similar to the Board of Directors in a company context. The council is responsible to manage and oversee operations (general supervision) of the management of the foundation by its officer and to ensure compliance by the Labuan foundation and its officer with the charter of the foundation and provisions of the LFA
Secretary

Compulsory

* This position Similar to Company Secretary

  • Compulsory appointment
  • The secretary must be a licensed Labuan Trust Company
  • Service provider to the foundation and performs a compliant agent function and acts as a conduit between foundation and Labuan FSA
Supervisory Person, Protector

Optional

  • Not a compulsory appointment
  • Compulsory for foundation that solicits donation from the public.
  • Role to monitor the Council’s decision, power to add or remove Officers, Council members etc.
Main features of Labuan Foundation
Registered Office
  • Mandatory to maintain a registered office within Labuan Island
  • The registered address must be the address of the trust company
Capital, Wealth Requirements
  • No capital requirements as a foundation does not have share capital.
  • Minimum endowment of USD 1.00 as an initial asset at time of establishment.
Legal Status
  • It is a legal entity, it can enter into contracts, buy and sell properties, own bank accounts or own shares or interest in other corporations.
Registration
  • All Labuan Foundation must be registered with Labuan Financial Services Agency (Labuan FSA)
Duration
  • May be fixed or infinite life span.
Currency
  • Expected to continue to operate in currencies other than the Malaysian currency (ringgit) in principle, except as authorized by relevant authorities
Compliance
  • All Labuan Foundation shall comply with the 2001 Anti-Money Laundering and Anti-Terrorism Financing Act 2001
Property
  • Property of the Labuan foundation is owned legally and beneficially by the foundation and is to be utilised solely for the purposes and objects stated in the charter of the foundation.
  • Property of the Labuan foundation can be Malaysian and/or non-Malaysian property.
  • Any assets endowed to a Labuan foundation shall be the properties of such foundation.
  • This includes:
    (d.1)   Assets of every kind whether corporeal or incorporeal, tangible or intangible, movable or immovable, however acquired may be endowed to a Labuan foundation; and
    (d.2)   Legal documents or instruments in any form, including electronic or digital, evidencing title to or interest in, such assets as described in the above bullet point including bank cheques, money orders, shares, securities, bonds, bank drafts and letters of credit.
Property in Malaysia
  • Labuan foundation for charitable purposes may hold Malaysian property and NEED NOT seek prior approval from Labuan FSA.
  • For Labuan non-charitable foundations, including foundations established for the benefits of family members that intend to include Malaysian property must seek prior approval from Labuan FSA.
Founder retains control
  • Founder can appoint him / herself as director and beneficiary
  • Founder can have rights and authority in the foundation’s or foundation’s Charter and Article
Creditors’ claimsAs the transfer of assets is completed prior to the occurrence of the claim, the asset will be out of the claim of the creditor for the founder as it has a corporate status that is separate from the founder. However, kindly pay attention to the following points on property transfer.

  • Assets are being transferred from the founders to the foundation before the obligee’s cause of action arises
  • Assignment of assets shall be 2 years from the date of establishment
  • The founder him / herself does not go bankrupt by transferring the asset from the founder to the foundation
  • Assets being transferred without intention to fraudulently deceive creditors
Accounts
  • Accounting books must be kept within Labuan Island
  • Must endeavor to be available at all times for auditing and viewing by executives
Redomiciliation
  • Possible. A foundation founded in another country (region) can change the home base of Labuan registered -> foreign nationality, foreign nationality -> Labuan nationality as long as jurisdiction of another country is permitted
DissolutionFoundation can dissolve when resolution of officer is established based on the following:-

  • The Foundation has been established for a certain period and its period has expired
  • When the objectives of the foundation have been achieved or impossible
  • Dissolution is required under the Charter

After dissolution, the ownership of the remaining assets will be transferred to the beneficiary

* At the Labuan Foundation, it is possible for a founder (Founder ≒ Director) to apply and acquire work perimit as well as a general trading company. Although it is theoretically possible, corporate tax is exempted, so Malaysia government has no merit of issuing the visa to that person, indly think issuance is very difficult unless we can explain the merit of such a thing. If you wish to obtain work permit, we recommend Labuan company as a wholly owned subsidiary, and apply for work permit on Labuan company side.

* 1 Charitable purpose should include at least one of the following objectives:-

Definition of charitable purpose
 1.  The prevention and relief of poverty
 2.  The advancement of religion, profession or education
 3.  The advancement of health including the prevention and relief of sickness, disease or of human suffering
 4.  Social and community advancement including the care, support and protection of the aged, people with a disability, children and young people
 5.  The advancement of culture, arts and heritage
 6.  The advancement of amateur sport, which promote health by involving physical or mental exertion
 7.  The promotion of human rights, conflict resolution and reconciliation
 8.  The advancement of environmental protection and improvement
 9.  The advancement of animal welfare
 10. The advancement of facilities for recreation or other leisure-time occupation in the interest of social welfare

The difference between Labuan Foundation and Labuan Trust

The difference between Labuan Foundation and Labuan Trust is as follows:-

 Labuan TrustLabuan Foundation
Governing law
  • Common Law
  • Civil Law
Legal entity
  • Not a legal entity with separate legal existence
  • Separate legal entity
Attribution of assets
  • Assets, upon being vested in the trust, are legally owned by trustee
  • Assets are legally owned by the foundation. Upon registration of the foundation, the property endowed no longer belong to the founder, but belong to the foundation
Relationship between parties
  • Relationship amongst parties is fiduciary
  • Relationship amongst parties is contractual
Name between parties
  • The person(s) who establishes the trust is known as the settlor
  • The persons who benefit from the trust are known as beneficiaries
  • The person(s) who creates the endowment is known as the founder
  • The persons who benefit from the endowment are known as the beneficiaries
Registration
  • No requirement to register trust
  • Registration of foundation is mandatory
Certificate documents
  • Trust deed
  • Charter and Articles
Administrative authority
  • The appointed trustee is the person responsible to hold the trust assets and administer the trust
  • The appointed trustee is the person responsible to hold the trust assets and administer the trust
Entity attribution
  • Settlor may have certain reserved powers after establishing the trust and vesting the legal title in the trust assets to the trustee
  • The founder does not retain or acquire any ownership rights in relation to the foundation’s property.
  • Beneficiaries or the persons in whose benefit the foundation was created may include the founder

(Ref: Labuan IBFC “Labuan Foundations Act 2010“)

(Ref: Labuan IBFC “Labuan Financial Services and Securities Act 2010“)

(Ref: Labuan IBFC “Guidelines on the Establishment of Labuan Foundation“)

(Ref: Labuan IBFC “Guidelines on the Establishment of Labuan International Waqf Foundation“)

Should you have any queries, please do not hesitate to contact us.


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