Labuan Trusts - Wealth Management

The creation of a Labuan trust is generally for an individual or a settlor to give specific property to a third party to be held for the benefit of others, including charities.

The Labuan Trust Act 1996 (LTA) allows the creation of the following types of trust:

Purpose trusts;
Charitable trusts;
Spendthrift or protective trusts;
Labuan special trusts.

Purpose

A Labuan trust may be created or established for a specific particular purpose which could be charitable or otherwise. A charitable purpose means and includes any of the following description of purposes:

The relief or eradication of poverty;
The advancement of education;
The promotion of art, science and religion;
The protection of the environment;
The advancement of human rights and fundamental freedom; or
Any other purposes which are beneficial to the community.

Registration
Operating Requirements
Fees

Registration
1. Labuan trusts may opt to be registered under the LTA using the following forms:
a) Labuan Trusts Act 1996 (LTA)
Form 1 – Application for Registration of a Labuan Trust.
Form 2 – Declaration by a Labuan Trust Company as Trustee.

b) Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA)
Form 3 – Application for Registration of a Labuan Islamic Trust.
Form 4 – Declaration by a Labuan Trust Company as Trustee.

2. For a Labuan trust that opts not to be registered with Labuan FSA, the following minimum information must be notified by a Labuan trust company to Labuan FSA within seven days from the creation of the trust:
Name of the trust.
Date of its creation.
Purpose of the trust.
Duration of the trust.
Name and address of the Labuan trust company acting as trustee.
Operating Requirements
All submissions for the registration of a Labuan trust must be filed through the Labuan trust company that also functions as a trustee of the Labuan trust.
The registered office of a Labuan trust shall be the registered office of the Labuan trust company which has been appointed as trustee of the trust and shall be the address for service of any documents relating to the trust.
The accounting records and other records shall be kept at the registered office of the Labuan trust.
A Labuan trust shall ensure that its settlor, trustees and other relevant person remain as fit and proper persons throughout the operations of the trust as may be prescribed in the Guidelines on Fit and Proper Person Requirements issued by Labuan FSA.
A Labuan trust shall ensure its compliance with the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.
All Labuan trust companies are required to submit a status update on Labuan trusts under their care to Labuan FSA on a half-yearly basis.
Fees

All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year:
Type of fees
Amount
Registration Fee
RM750
USD200
Renewal of certificate of registration
RM50
USD15

Registration
1. Labuan trusts may opt to be registered under the LTA using the following forms:
a) Labuan Trusts Act 1996 (LTA)
Form 1 – Application for Registration of a Labuan Trust.
Form 2 – Declaration by a Labuan Trust Company as Trustee.

b) Labuan Islamic Financial Services and Securities (Amendment) Act 2022 (Act A1655) (LIFSSA)
Form 3 – Application for Registration of a Labuan Islamic Trust.
Form 4 – Declaration by a Labuan Trust Company as Trustee.

2. For a Labuan trust that opts not to be registered with Labuan FSA, the following minimum information must be notified by a Labuan trust company to Labuan FSA within seven days from the creation of the trust:
Name of the trust.
Date of its creation.
Purpose of the trust.
Duration of the trust.
Name and address of the Labuan trust company acting as trustee.
Operating Requirements
All submissions for the registration of a Labuan trust must be filed through the Labuan trust company that also functions as a trustee of the Labuan trust.
The registered office of a Labuan trust shall be the registered office of the Labuan trust company which has been appointed as trustee of the trust and shall be the address for service of any documents relating to the trust.
The accounting records and other records shall be kept at the registered office of the Labuan trust.
A Labuan trust shall ensure that its settlor, trustees and other relevant person remain as fit and proper persons throughout the operations of the trust as may be prescribed in the Guidelines on Fit and Proper Person Requirements issued by Labuan FSA.
A Labuan trust shall ensure its compliance with the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.
All Labuan trust companies are required to submit a status update on Labuan trusts under their care to Labuan FSA on a half-yearly basis.
Fees
All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year:
Type of fees
Amount
Registration Fee
USD200
Renewal of certificate of registration
USD15

Labuan Islamic Trusts

A Labuan Islamic trust can be established under Section 105 of the Labuan Islamic Financial Services and Securities (Amendment) Act 2022 (Act A1654) (LIFSSA) and all the provisions of the Labuan Trusts Act 1996 (LTA) shall apply to a Labuan Islamic trust unless specifically provided. The object, purpose and activity of the Labuan Islamic trust must be in compliance with Shariah principles. 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 Shariah principles.

The trustee of a Labuan Islamic trust is required to appoint or consult a Shariah adviser to advise on matters relating to the operations of the Labuan Islamic trust to ensure its compliance with Shariah principles.

The vesting of property into a Labuan Islamic trust may be facilitated through hibah or hadiah as guided by the Shariah Resolution of the Shariah Supervisory Council of Labuan FSA on Labuan Islamic Trust issued by Labuan FSA.

Governing Legislation

Labuan Trusts Act 1996

Labuan Financial Services and Securities (Amendment) Act 2022 (Act A1654)

Labuan Companies Act 1990

Labuan Business Activity Tax Act 1990

Related Guidelines and Circulars

Guidelines on the Establishment of Labuan Trust and Islamic Trust

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FAQs

1. What is Labuan banking?
Labuan banking means the business of receiving deposits on current accounts, deposit accounts, savings accounts, and includes the investment banking business, Labuan financial business, Islamic banking business and such other transactions and terms and conditions as specified by Labuan FSA in any currency including Malaysian Ringgit where permitted by Bank Negara Malaysia.
2. What is investment banking?
Investment banking means the business of providing credit facilities and consultancy and advisory services relating to corporate and investment matters, including making investments on behalf of any person. Other activities include undertaking foreign exchange transactions, interest rate swaps, dealings in derivative instruments or derivative financial instruments or any other similar risk management activities.
3. What is Islamic banking?
Islamic banking is defined as a banking business that is in accordance with Shariah principles.
4. Who may apply for Labuan banking licence?
Organisations that meet the following minimum criteria may apply for a Labuan banking licence:
Must be a bank or financial institution
Possesses a sound track record
Accorded a good credit rating by acceptable rating agencies
Supervised by a competent regulatory authority; and
Conforms to generally accepted standards of international banking practices or the Bank for International Settlements (BIS).
5. What is the minimum working minimum fund for an investment bank?
RM10 million or its equivalent in any other currency.