Breadth of views - breadth of capabilities
We will give you a choice of best approaches

FOLLOW US ON:

Labuan Trusts

LOYAL, RELIABLE AND COMMITTED TO OUR LABUAN TRUST CLIENTS

In a trust, property – which can include physical as well as intangible assets such as funds, shares, real estate, patents, rights, cars, boats – are looked after or managed by trustees for the benefit of another person or group of people.

The settlor usually decides who the beneficiaries are, and though the trustees hold legal title to the property of the trust, the equitable title remains with the settlor.

The trustees must always be a person or company and they must remain independent from the settlor. They are fully responsible for the administration of the trust and its affairs and must ensure that investments are made wisely and that the property under their charge is always administered to ensure the best return for the beneficiaries. It is also up to the trustees to ensure that tax returns and any other administrative duties are carried out in full and on time.

A beneficiary will normally be a person or group of people, but may also be a company.  It could even be the settlor himself if such an arrangement has been agreed with the trustees. The beneficiaries are the beneficial owners of the property administered by the trust.

The terms of the trust are laid out in the trust document and this is subject to the laws of the jurisdiction it is established in. Though there are lots of variations of a trust and it is governed by different laws in different jurisdictions, generally speaking trust law is sound and predictable making a trust an excellent option to consider for asset protection.

We will advise you of all the relevant laws and procedures you need to be aware of when creating a Labuan Trust, including the Labuan Trust Act 1996.

THE BENEFITS OF SETTING UP A TRUST

Protecting your assets and privacy

It is always a good idea to separate yourself from your assets as it protects them from any future claims made by creditors or as the result of a lawsuit – a divorce for example. Trusts have been used in this way for hundreds of years. The ‘discretionary trust’ is one of the most popular incarnations of the trust for the purposes of asset protection.  In this instance, the settlor may be a protector of the trust as well as a beneficiary, but he can’t be a trustee and he must not be the sole beneficiary. He benefits from the assets, but doesn’t own them, which puts them beyond the reach of creditors. The name of the trust will usually be completely unconnected to the settlor’s name, affording him total privacy, and generally speaking the documents which govern the trust will be confidential.

Estate planning

Trusts will often be established in countries where the law dictates that assets must be passed on to a particular person upon the death of the owner, regardless of what the owner’s wishes were. If the assets are owned by a trust, these forced heirship rules can be sidestepped as the trust can be deemed to hold the assets indefinitely – i.e. they don’t ever have to be passed down.

Tax planning and benefits

Establishing a trust is a very good way of maximising income from your assets and the tax consequences of a trust are very favourable. Any trust domiciled in Labuan enjoys the same tax benefits as other business entities on the island:

  • Income derived from holding investment activity is tax exempt
  • The Exchange Control Act 1953 does not apply to a Labuan trust
  • There are no withholding taxes on the income distribution to the beneficiaries of a trust

SPECIALISED TRUST PRODUCTS

We offer two specialist types of trust which may be more appropriate for your particular needs. There are two main types of Labuan Trusts available. The Purpose Trust is ideal for a particular function, and its flexibility means it can be used for business or personal, charitable or non-charitable, reasons. The Special Trust is for those seeking greater control over the operations of the Trust.

With a team of intelligent, qualified and friendly professionals, we can assist you at every stage of your Labuan Trust creation. From the initial inquiry stage, where our over 50 years’ experience allows us to give current and focused guidance, to the establishment of a Trust, our services are tailor-made and competitively priced.

A. LABUAN PURPOSE TRUST

As the name suggests, this is a trust established for a particular purpose, which can be charitable or non-charitable. Unlike other types of trust, a purpose trust does not need to have any beneficiaries or anyone who has beneficial ownership. This can be useful for carrying out a number of different transactions.

Charitable trusts are set up for the benefit of the community as a whole or a substantial section of the community. Their purpose must be for one of the following reasons:

  • The relief or eradication of poverty
  • The advancement of education
  • The promotion of art, science or religion
  • The protection of the environment
  • The advancement of human rights and fundamental freedom or any other purposes which benefit the community

A non-charitable trust is one that is created for a particular purpose as decided upon by the settlor or his personal representatives.

Why set up a Labuan Purpose Trust?

Below are some of the reasons Labuan Purpose Trusts are set up:

  • In order to secure asset financing.
  • For joint ventures where neither party wants to be formally associated with the other or to be in control of the voting power
  • For the ownership of a private trust company. If a company is incorporated in order to be the trustee of a private trust for a family, the shares of that trustee company can now be held in a Labuan purpose trust
  • To incorporate and hold shares in a private trust company to act as a particular trust or group of trusts
  • To hold shares in a Special Purpose Vehicle (SPV). Usually SPVs are used in off-balance sheet transactions, securitisation and debt clearance transactions, or for various commercial transactions
  • To act as an impartial custodian or where a settlor would like the purpose to be one that is neither personal or charitable
  • To isolate investment funds or asset ownership within a subsidiary from group risk
  • To benefits an arts collection and to provide funds for its maintenance
  • To make the most of the generous tax benefits on the island when distributing and transferring the assets of the trust

Key features of a Labuan Purpose Trust

  • The purpose of the trust will be laid out in the terms of the trust and there are no restrictions on what the purpose may be. However, according to the Labuan Trusts Act 1996, the purpose must be valid, which is why it’s best to get professional advice before deciding upon the purpose of your trust
  • Two or more trustees must be appointed but they do not have to be resident in Labuan
  • Because there are no beneficiaries, all the assets or profits derived from them must go towards the purpose of trust
  • A person must be appointed to enforce the trust and this person or company must ensure that the trustees carry out their duties and apply trust funds for the proper purposes
  • There is no rule against perpetuities, however, a trust can only exist for a maximum of 100 years. At the end of this period the trust property should be distributed to the people who are entitled to it, as laid out in the terms of the trust


B. LABUAN SPECIAL TRUST

The Labuan Trusts Act 1996 was amended in 2010 to create a new range of trust products, one of which was the Labuan special trust. It is best described as a new incarnation of a common law trust where the settlor retains full control of the trust himself. This is a major benefit, as offering reserved power to the settlor/and or protector means he can administer the assets of the trust himself with little interference from the trustees. The framework is similar to the VISTA trust of the Virgin Islands and the STAR trust, which is the Cayman Islands equivalent.

What are the advantages of a Labuan Special Trust?

  • It can hold shares and interest in a Labuan Company or LLP
  • The settlor has reserved powers and retains control of the trust himself
  • The trustee has no controlling power over the trust and its assets
  • The shares may be held indefinitely
  • It protects against foreign law claims, enforcements and judgements
  • It can be used and structured as a Special Purpose Vehicle (SPV)
  • Perpetual trusts are permitted as a default provision. Fixed terms trusts can be converted to perpetual trusts and vice versa and the duration can be shortened or extended
  • There are a number of strict provisions in Labuan which ensure confidentiality is balanced against other provisions which require trustees to provide information
  • The law governing the trust can be chosen by the settlor or implied in the trust
  • It can be invested to Islamic Shariah principles or not, whichever is more beneficial to the settlor, manager and trustees

Key features of Labuan Special Trust

  • The Labuan Special Trust enables owners of a Labuan company or Labuan Limited Liability Partnership (“LLP”) to establish a trust to specifically hold shares or partnership interests in the Labuan Company or Labuan LLP.
  • The trustee will hold the shares on a “trust basis”; the management of the company continues to be carried out by the directors without any power of intervention by the trustee.
  • The Settlor or owner of the shares or partnership interests will be able to divest his ownership to a trustee under normal trust rules but still retain control of the shares or partnership’s interests.
  • The Trustee’s role and involvement in the Trust’s affairs may be specified in the trust instrument documents.
  • The trust assets consisting of holding shares in a Labuan Company will fall under the ambit of the Labuan Companies Act 1990 and the governing laws of Malaysia.
  • Labuan Special Trust can also be established under Islamic Shariah principle pursuant to Labuan Islamic Financial Services & Securities Act 2010. This is a special feature in Labuan, which is not offered or available in any other IBFC jurisdiction

WHY WE ARE THE RIGHT PEOPLE TO HELP YOU SET UP A LABUAN TRUST

We are a fully licensed trust company with a highly experienced team of dedicated professionals. We can help you plan, establish and structure a Labuan trust, and can offer you bespoke solutions, competitively priced services and professional advice backed by over 50 years’ experience.

To find out more about how we can help you set up your Labuan trust, contact us on our live support or email us at info@labuanborneotrustees.com.