There are various types of trusts to be established i.e, purpose trusts, charitable trusts which includes the unique 'advancement of human rights and fundamental freedom; spendthrift or protective trusts and the Labuan Special Trust. The Trust may be registered with Labuan FSA.
Entry Requirement :
- A settlor of a Labuan trust must be a qualified person or a resident who can retain certain wide powers including revoking, amending or varying the terms of the trust.
- The beneficiaries of a Labuan trust must also be a qualified person or a resident. One of the trustees of a Labuan trust must be a Labuan Trust company but a trustee cannot also be an Enforcer, although a settlor or his representative can be an Enforcer too.
- Where a trust property includes Malaysian property, prior approval must be obtained from the Authority and any income derived from the property is subject to Malaysia Income Tax Act 1967. Non-Malaysian property income shall be subject to Labuan Business Activity Tax Act 1990 (LBATA).
- Duration of a trust - The terms of a Labuan trust may state its existence for a fixed duration or if not stated, it can be for perpetuity. There is also provision under the law for the conversion of a Labuan trusts from a fixed duration to an unlimited period or alter it by limiting or extending the duration.
- Under the Labuan Special Trust, a trust of company shares can be established under which the shares can be retained indefinitely and the management of the company may be carried out by its directors without any powers of intervention by the trustee. This form of trust is ideal for succession or dynastic planning as well as for matrimonial settlements.
The formation of an international trust is generally for someone or a settlor to give specific property to a third party to be held for the benefit of others, including charities. The creation of a Shariah compliant trust is to provide an alternative for a settlor to exercise his rights in creating a trust in accordance with the Shariah principles.
The requirement is to ensure that the investment of the trust property is channelled to Shariah approved business or activities, the mode of acceptance of the trust property, the liquid investments, the long-term investments, the tenancy and relevant agreements thereto and the distribution are in line with Shariah principles.
The settlor can be any person as defined under Part I subsection 2(1) of Labuan Trust Act 1996 (LTA). The settlor and beneficiaries can be an heir, non-heir or a corporate entity or organisation legally established or registered in any recognised jurisdiction. In addition to the provisions in LTA, the followings are to be satisfied in forming a Shariah compliant trust in Labuan IBFC:
- The settlor is a non-resident of Malaysia at the time the trust is created. A settlor may also be a beneficiary of a trust provided he is not the sole trustee of that international trust;
- The beneficiaries must be non-resident of Malaysia, unless the said trust is for charitable purposes as stipulated under Section 7 (2) LTA. Unless the context otherwise requires, all other provisions regarding qualification of the beneficiaries remain as per Section 22 of LTA;
- The trust property does not include any immovable property situated in Malaysia, unless otherwise allowed by the relevant authorities and laws for the time being in force; and
At least one of the trustees must be a trust company licensed under the Labuan Financial Services and Securities Act 2010 (LFSSA). The trustee may also be a beneficiary of an international trust provided he is not the sole trustee of that international trust.