Guide to Register Labuan Trust-An Effective Vehicle for Managing Your Wealth
4 key points of a Labuan Trust:
Wealth Preservation in a Tax Efficient Manner
If your Labuan Trust undertakes businesstrading activities, the net profit tax will be at 3% or RM20,000 upon election. Distributions made to beneficiaries are tax exempt. However, for Malaysia property, the disposal may be subjected to real property gain tax and rental income.
Flexibility and Control
In order to have full control, settlor can set a Labuan Private Trust company. It acts as A Trustee and provides you full control over how the trust is to be structured, the types of assets held, your trustees, and duration of the trust to meet your needs. It also allows you to add or remove beneficiaries, protector, or advisers, amend the terms of the trust, re domicile to another jurisdiction. Duration of the Trust is as your wish where you can decide either a fixed or infinite life span that, may be lengthen or shortened during its life-time.
Labuan Trust is governed by the Labuan Trust Act, a robust and cutting edge Act with layers of asset protection:
a. against creditors prior to their action or 2 years after it Guide to Register Labuan Trust
b. without reference to the laws of any country or jurisdiction
c. unenforceablity of foreign, marriage termination or insolvency claims
Confidentiality Guide to Register Labuan Trust
Labuan FSA enable everything to be kept under wraps for Labuan Trust, at all times with serious confidentiality protection.
5 common types of Labuan Trust:
This trust allows the trustee to be according largely unfettered discretion to exercise his or her own judgement as to the timing, manner and amount by which beneficiaries of the trust might benefit from trust assets. It is particularly useful when the needs of an individual beneficiary or class of beneficiaries cannot be predicted. The beneficiaries of a discretionary trust have no legal rights to any particular portion of the trust fund. The settlor is to provide guidance to the trustee with regard to the administration of the trust fund by way of a “letter of wishes”and will manage the trust with consideration to exercise discretionary powers for the benefit of the beneficiaries.
Fixed Interest Trust
It is a fixed form of trust where the trustee does not have any discretionary powers over the distribution over how and when assets are to be made to the beneficiaries. It is possible to arrange a combination of fixed and discretionary trusts.
A trustee may, therefore, be given discretionary powers regarding distribution for a period of time, after which there is a requirement to distribute the capital of the trust fund in certain fixed proportions.
Accumulation and Maintenance Trust
It is a trust that may be used where the settlor wants to benefit a specific group of relations, for example his or her grandchildren. This type of trust will often be partly discretionary, may be for the purpose of their maintenance or education up to specific age, at the outset and later become one where a fixed interest exists. When that age is reached, each child’s specified share of the trust fund will be distributed to him or her, or form a trust fund for that child.
Purpose Trust Guide to Register Labuan Trust
A purpose trust is a type of trust which has no beneficiaries, but instead exists for advancing non-charitable purpose of some kind.
Reserved Powers Trust Guide to Register Labuan Trust
Should the settlor wish to reserve certain specified powers in relation to the trust fund, e.g. to give direction to the trustee as to investment of the trust assets, or the power to appoint or remove a trustee or beneficiary, he or she may set up a Reserved Powers Trust. Guide to Register Labuan Trust
Establishment and Operation of the Labuan Trust as follows:
1. A Trust Deed is the central governing document and sets out trustee’s powers, the terms and conditions where usually the settlor is able to tailor the terms of the trust to satisfy his requirements
2. Assets being vested in the Labuan Trust legally owned by the trustee
3. Must appoint a trustee which has to be a Labuan Trust Company to hold the trust assets and administer the trust
4. Can have any number of trustees where one of them is a Labuan Trust Company
4. Common law origins and subject to Labuan Trust Act 1996 and it amendments of 2010
5. No capital requirement for Labuan Trust registration Guide to Register Labuan Trust
6. If the trust is involved in trading activities, accounts will be subjected to audit at tax rate of 3% or RM20,000 with management account
7. Investment holding company, the tax rate is 0% with no audit report
8. Dealing with Malaysian property(ies) require approval from Labuan FSA. All rental income derived from the properties is subject to 24% Malaysia local tax and property gain tax may be applied upon property disposal.
4 Key roles of the personnel involved in Labuan Trust:
a. Settlor – Creates the trust by transferring assets into a trust. Settlor may be an individual person or a corporate entity.
b. Trustee – Holds the trust and responsible for its administration for benefit of the beneficiaries
c. Protector/Enforcer – May be appointed by settlor, to monitor the activities of the trustee and offer guidance to the trustee for the benefit of the beneficiaries. The settlor can be also be the protector who can have power to appoint or remove trustee.
d. Beneficiaries – the Person legally benefiting from the trust. Can be individual or reference to a class, charities, minors, corporations etc.
You can opt not to register your Labuan Trust with Labuan FSA. Registration with the Labuan FSA Authority will involve some fees and submission procedures will take about 14 days. Registration of the trust required to submit a certified copy of the trust and declare Labuan Trust Company as the Trustee. For Labuan Islamic Trust, it has to be subjected to Syariah compliance.
Operational requirements for Labuan Trust is as follows:
- All submissions for the registration of a Labuan Trust must be filed through the licensed Labuan Trust Company who also has been appointed as a trustee to the Labuan trust.
- The registered office of a Labuan Trust shall be the registered office of the Labuan Trust Company in Labuan and shall be the address for service of any documents relating to the trust.
- The accounting records and other records shall be kept at the registered office.
- A Labuan Trust shall ensure that its settlor, trustees and other relevant person remain as fit and proper persons throughout the operations of the trust as may be prescribed in the Guidelines on Fit and Proper Person Requirements issued by Labuan FSA.
- A Labuan Trust shall ensure its compliance with the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.
- The Labuan Trust Company acting as the trustee are required to submit status update on Labuan trusts under their care to Labuan FSA on a half-yearly basis.
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