Labuan International Business and Financial Centre (Labuan IBFC) is at the avant-garde of global cross-jurisdictional wealth planning, providing high-net worth people lots of frameworks emphasising on wealth creation and wealth preservation; in both conventional and Islamic structures. Labuan Private Foundations are governed by the Labuan Foundations Act 2010, which allows a Labuan private foundation to determine its characteristics and assets for charitable or non-charitable purposes.

In the past couple of years, the offshore private foundation is earning reputation in Asia, however the Europeans have been susceptible to this wealth management and succession method over 100 years ago. It is regarded as a separate legal entity which is not impacted by any involuntary bankruptcy of the stakeholders. A private foundation also provides protection against foreign claims and cannot be liquidated vehemently to fulfil the claims emerging from divorce, lawsuit or creditors. Another added benefit of a Private Foundation in Labuan is that it can own assets and various businesses under one single legal entity either for the intent of the stakeholders or family business succession. Furthermore, Offshore Private Foundations in Labuan are free from taxation unless they engage in business activities or profitable investments; in that event, income obtained will be taxed at 3% after net profit.

Prior to setting up a Labuan Foundation, the founder is required to determine the intent of his/her private foundation and outline the guidelines / requirements for the distribution of funds. This is significant to establish the structure and tax treatment of the foundation.

• The intent of the foundation set up is key to establish right tax structure.
• To decide if the private foundation is for private use and/or charitable purposes.
• A charitable foundation can be simple to set-up however is subjected to more legal and compliance requirements.
• To register a Labuan Foundation, the founder needs to appoint a registered Labuan trust company to be the resident secretary of the said Labuan foundation.

Key advantages of a Labuan private foundation

• 0% tax on the dividends of profits to stakeholders
• 0% tax on interests earned for placing deposits in Labuan offshore banks
• 0% corporate tax for the investment in a holding company
• 0% withholding tax on interest, management fee, royalty and technical fee
• Ability to access more than 70 international tax treaty partners
• Corporate tax of 24% for revenue attained from Malaysia
• No foreign exchange control for banking transactions worldwide

Steps to start an offshore private foundation in Labuan –

• Establish the structure and objective of the foundation
• To identify the stakeholders / beneficiaries of the foundation
• Identify and appoint a licensed Labuan Trust Company to assist with the incorporation of the Labuan private foundation

Our QX Trust team of private wealth experts is proficient and holds good years of experience in assisting clients with registering their Labuan Foundation including all-round estate planning and family business succession. To understand better the advantages of an offshore private foundation in Labuan and how it can help in your wealth and business succession planning, reach out to us today and let our private wealth consultants to assist you in creating the suitable private foundation to safeguard you wealth and your generations to come. Contact us at +60 3 9212 6940 or consultant@qx-trust.com to schedule a complimentary consultation.