Private Foundation and Charitable Foundation

What is a Charitable Foundation?

charitable foundation is a category of non-profit organisation that will typically provide funding and support for a specific cause and/or other charitable organisations through grants or donations, as well as participating directly in charitable activities.

A Charitable Foundation has a widespread of public support that functions dynamically to promote other public charity(s), or is dedicated exclusively to a specific cause (ie cancer, education, children, etc). Many public charities rely on contributions from the general public. Donations to public charities are generally fully tax deductible to the extent of the law.

Charitable foundations or public charities missions range from aiding the poor to easing community tensions to progressions in religion, education, healthcare or science. Notable instances are churches, universities, hospitals, and medical research groups.

A public charity is either “publicly supported” (derives a substantial portion of its support from the public) or operations to “support” one or more organisations that are public charities.

Labuan Charitable Foundation

It is a foundation established by the founder for charitable purposes only and is non-profit oriented. Labuan Charitable Foundation’s function will be generally donating funds and supporting other non-profit organisations, or offering the source of own funding for its personal charitable purposes. The intent is to facilitate public benefits or other intents which are beneficial to the community.

Key Advantages of Labuan Charitable Foundation

Asset Protection

Foundation is definitely an ideal structure for asset protection, locally and globally. It is the only Foundation entity which protects assets, compared to other charitable entities in Malaysia and some parts of Asia.

Reservation of Powers

The founder reserve full powers to dictate and control the manner in which the assets are being handled; even though the Founder has transferred the assets to the Foundation and the reservation powers can be included in the Charter.

Full Administration and Control

Clear cut delegation of authority and concise operating rules can be embodied in the Charter which will make managing the Foundation simpler, more effective and less divisive.

Tax and Exemptions

100% tax exempt on distributions, no inheritance tax, no service tax. Although, income derived from holding Malaysia properties will be subjected to Malaysia local tax and property gain tax.

Secrecy and Confidentiality

There is strict regulation in place to ensure the privacy of the founder and the Foundation are protected and it is a criminal offense for anyone to wrongfully disclose information of the foundation.


What is a Private Foundation?

A private foundation is a separate legal entity for wealth preservation and succession planning commonly set-up by the HNWIs. Nonetheless, it can also be a non-profit entity to serve a charitable cause and generally established with funds from a single source or specific sources, like family or corporate money – rather than funding from the general public.

Even though contributions to a Private Foundation is tax deductible, many of these non-profits do not accept donations. Rather, private foundations generally invest their principal funding, then distribute the income from investments for charitable intents.

Private foundations usually use these funds to make grants or gifts to other non-profit organisations. They are also known as grant making entities. In this regard, they help charitable, educational, religious, or other causes which benefit the public.

A private non-operating foundation grants money to other charitable organisations too. It performs its exempt purpose by grant making to other organisations. These foundations often do not directly perform any charitable programs or services other than grant-making. A private operating foundation distributes funds to its own programs which exist for charitable purposes.


 Labuan Private Foundation

Labuan Private Foundation acts as an ideal medium to consolidate all assets with the target of handling these assets for the benefit of a class of individuals on a contractual basis. It is a registered corporate body with a separate legal entity from its managers (i.e. its officers and council) and is generally used for private wealth management, business succession and asset preservation.

Also, if you live in the Asian region, Labuan Private Foundation is popular and favoured well as it is governed and regulated by the Labuan Foundation Act 2010. Currently, 21 jurisdictions globally including Labuan, have their own Foundations Acts to govern the wealth management and its foundation activities. Re-domiciliation to one another among these jurisdictions and vice versa is permissible as well.

Key Advantages of Labuan Private Foundation

  • Founder has 100% control at all times.
  • Founder is able to depict how the foundation will be structured and managed, the kinds of assets to hold/invest, and very importantly, its Founder has the freedom to make alterations anytime through the Charter.
  • Founder can be an individual or a corporation.
  • Comparatively low price to function and to maintain Foundation over a Trust.
  • Founder is safeguarded from foreign claims and cannot be forcefully liquidated to satisfy other obligations like claims arising from divorce, lawsuit or creditors after 2 years.
  • It is a corporate body which is entitled to enter contact and execute lawful dealings.
  • It is a legal entity completely secured by its own Labuan Foundation Act 2010.
  • Life span of a foundation can be perpetual or for a fixed period – based on Founder’s choice.
  • No minimum amount of assets requirement to be injected for initial set-up.
  • Permissible to hold global assets including Malaysian assets.


The above describes the differences between a Labuan Private and Charitable Foundation. Find out more information TODAY! Speak to us to explore on your wealth and management structures; and know how much is good enough to start a Labuan Private Foundation to protect your asset and wealth. Contact our QX private wealth advisors at +6 03 9212 6940 or for a free consultation.