LABUAN PRIVATE TRUST
For high networth individuals and wealth families using trusts vehicle for their dynamic wealth planning and succession and wanted to have a better control over their trusts, they can set up a Labuan Trust Private entity. The underline of a Labuan Private Trust (PTC) is a Labuan company. PTC is introduced by Labuan FSA for the sole purpose to act as corporate trustee to a trust or a number of trusts, created by a settlor or individuals connected to the settlor. The composition of the board can be changed from time to time to bring in members of succeeding generations and in this way, involve them in the management of family affairs. In a PTC, the settlor, members of his family or his advisers can be appointed to the board of directors. Here are example of individuals that connected to the settlor are as follows:
- Spouse | Children | Parents | Grandparents| Siblings
- Parents in- laws | Siblings in-laws | Siblings children
7 advantages of using Labuan Private Trust Company
- Confidentiality – all information are kept within the close circle, without using an independent professional trustee.
- Complete Control – The board of the PTC can be changed from time to time, may consist of the settlor, members of his family and trusted advisors/agent (can be appointed by settlor)
- Powerful Influence – The settlor and his family members have direct involvement in the decision making processes.
- Management succession planning – PTC vehicle can be familiarised with the family members and guide them in the management of these assets for their best interest.
- Continuity – The administrator/advisors/agent may change but the PTC will remain as trustee providing continuing of asset ownership.
- Diversified investment – PTC allows a greater choice and analyze the risk appetite as to what investments or major transactions may be made with the trust fund based on varied knowledge of family members acting as Board members. Independent professional trustees may not have investment knowledge of certain area.
- Lower Cost – The ongoing costs may be lesser than the trustee fees charged by independent professional trustee, particularly if the trust assets are substantial.
- Ownership succession – PTC may be owned by the settlor or family member(s) and PTC shares can be of different peoples with no requirement to appoint beneficiaries.
- Low tax – PTC will enjoy tax of 3% of net profit with audit financial report or pay flat tax fee of RM20,000 with submission of management account.
Labuan Private Trust – Tax Benefits
A PTC is deemed as a Labuan entity under the Labuan Business Activity Tax Act 1990 (LBATA), hence it can benefit from the preferential tax treatment provided in LBATA with incentives under Income Tax Act 1967. Tax benefits are as follows:
- Income derived by the PTCs from trading activities would be subject to tax at the rate 3% of its net audited profits or RM 20,000, as elected
- Income from non-trading activities, i.e. purely from investment holding is not subject to tax. However, if the PTC undertakes trading and non-trading activities, then the activities would be deemed as trading activities
- Stamp Duty exemptions accorded for transfer of shares and all Labuan instruments made
- Dividends received by PTC shareholders are tax-exempt
- Payments made to non-residents by the PTC, such as management and technical fees are exempted from withholding tax
- Non-citizen and non-resident directors of the PTCs are exempted up to 100% of the Director’s fees paid by the trust
- Distributions received from a PTC by the beneficiaries are tax-exempt.
- PTC can qualify as tax resident for Malaysian tax purposes if at least one of the trustees of the PTC is a Malaysian, thereby qualifying for the benefits of the Double Tax Agreements signed by Malaysia with more than 70 countries
PTC business can only provide the trust services to the trust which can also include the following:
- Provide trustee services including review of the trust instrument(s) and the type of assets funding the trust(s), trust management and accounting services;
- Perform secretarial duties of the private trust(s), such as lodgement of any documents and reports through the licensed Labuan Trust Company
- Carry out activities such as being an agent, executor or administrator or other activities pursuant to the objectives of the PTC and trust
Labuan Private Trust Company License
It is a requirement to obtain the license for the PTC to carry on Labuan Trust Company Business, we will profile and submit the following documents to Labuan FSA for the license:
1. a copy of the draft trust instrument
2. profile of the directors and officers with proof as fit and proper person
3. letter of undertaking of services providing to the private trusts only
4. Labuan Trust Company act as the agent and provide a certified copy of the executed agent’s engagement agreement.
The complete set up of the Labuan Private Trust company will take about 5 to 7 days and license approving, often within 60 days.
Operation requirements of a Labuan Private Trust Company is as follows:
- The PTC must appoint a licensed Labuan Trust Company to register the company
- The PTC must maintain a registered office in Labuan
- Must have a qualified resident secretary which is the Labuan Trust Company
- Need to submit a certified copy of the executed trust instrument and any subsequently executed trust instrument to Labuan FSA
- Any change licensed Trust Company as agent required to notify Labuan FSA within 7 working days
- Have proper arrangements in place to account for and keep all assets and other valuables that it has received in its capacity as trustee duly separated from the trust company’s own assets and liabilities
- Adhere to annual compliance of annual return and tax filing
- Pay annual license fee of RM5,000 on or before 15th January
Feel free to contact us +603 2161 0354 for an appointment to know more of Labuan Private Trust Company or drop us an email at email@example.com. We “simplify the complexities” of your Labuan investment.