Guide to Use Labuan for Your Wealth Protection
Labuan Foundation to Build Your Legacy
How important is it to protect your assets? For most people, it is extremely important. This is especially for those who have dependents and a large quantity of assets. When you have assets that is worth a lot of money, it is important to make sure your assets do not end up in the wrong hands, or that it does not hang in limbo if your family members go to court to divide your assets.
A typical example:
A Mr. X has many business ventures managed by different family members for different business segments with different business strategies. He also has a business venture in Hong Kong Off-Shore Financial center.
His problems are:
When one of his businesses fails, there is a risk that all the other businesses may not be protected from the creditors’ reach. His Hong Kong Offshore Company (HKOC) is not getting the tax advantage that he is supposed to get, because this HKOC did more than 50% sourcing from the local markets. As such, his company is not deemed to be an offshore company and hence it is taxed as a local Hong Kong company. He also has 2 Malaysian companies under his business empire. He has 2 wives and 5 children. Although they get along well now when he is still alive, there is no guarantee that his children may not split his business empire after he has passed on.
He wants to achieve 3 objectives :
- Asset Protection
- Tax Efficiency
- Heritage Protection
To ensure protection of other businesses, should any one of his business fail, he can structure a Labuan Private Foundation in Labuan. Some call this the Family Office Structure. The Labuan Private Foundation owns all the shares of all the companies and become the ultimate holding company of the businesses.
Each of the businesses under this holding company has their own separate accounts and its assets are all ‘ring-fenced’ within the individual cell company from creditors of the cell in the event of litigation.
The benefits of protection from creditors are priceless! Profits from each of the companies are paid out as a dividend to the Foundation and all distributions to beneficiaries from the Foundation attract no tax.
He can move his HKOC to a Labuan International Company to increase tax efficiency. Labuan is a low tax jurisdiction. This structure helps to reduce his tax liabilities from 16.5% to 3%. This is a highly significant tax saving.
Moreover, all business transactions can be traded in any foreign currencies including HKD through the use of multi currency account available to Labuan company. In this way, he does not suffer exchange loss. As Hong Kong is relatively more expensive to create a commercial substance than Labuan, having your operating business substance in Labuan is a way to save business costs.
For Labuan Private Foundation, he will be the founder and his dependents can be the officer, council members and beneficiaries of the foundation. This makes up the Family Office to that can ensure a long-lasting legacy that everyone can enjoy. To further enhancement the structure, a Family Corporate Governance can be formalised to ensure peaceful dealing among members at all times, and all individual interests are well protected.
There are other structures you can deploy for your wealth planning offered by Labuan Jurisdiction such as Private Trust. For more information on Labuan Wealth Solutions, please visit LabuanWealth.com.
Feel free to call on us at +603-2783 9191 (Labuan Division) for a private consultation or email us to guide you on the use of the correct vehicles for your wealth planning!
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