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The following describes what constitutes trust in Labuan and why creating trust in this jurisdiction is so popular among offshore founders. The advantages of an offshore trust in Labuan are indicated, and it is explained why trusts are very beneficial for founders.

Information at this website https://offshorecitizen.net/ serves as a guide for potential offshore founders when deciding on the acceptability of a given jurisdiction to place their estate in a trust.

The founders need to understand the main difference between a non-offshore and an offshore trust, namely: in an offshore trust, assets are stored in another country, and the trust is created under the laws of an offshore jurisdiction.

What is trust in Labuan?

Legislation of Labuan defines trust as an agreement between the founder of the trust property and the trustee to manage the assets of the founder in the interests of the designated beneficiaries. When creating a trust, the founder must meet a number of requirements, the founder appoints the trustee, who must be an adult in his right mind. The founder’s claims on the trustee are set out in the trust declaration or trust agreement, and such provisions are binding on the trustee. To control the management of a trust, there may be a guarantor ensuring compliance of the trust work of the trust declaration (trust agreement).

A trust in Labuan, when it is created, does not acquire the qualities of a legal entity, but allows the founder to transfer its own assets into it, where the trustee will dispose of them. In the Laboan Trust, the founder and beneficiaries are appointed during the creation of the trust. A trust must not have any real estate in Malaysia, and at least one of the trustees of the trust must be in the form of a “company” (a company entered in the Labuan Companies Registry Law of 1990). The trust company does not have to have its own office, however, it must hire a manager. Also in Labuan it is necessary to appoint at least two employees of the trust.

According to the legislation of Labuan, the life of the trust can reach 100 years, however, this period can be specified in the terms of the trust creation. Foreign trusts are recognized and can be registered in Labuan.

Why create an offshore trust in Labuan?

Labuan serves as a tax haven for investments and international offshore trusts since the creation of the Labuan Offshore Financial Services Service (LOFSA). Since 2006, offshore founders have created international trusts in Labuan to protect their assets. The Offshore Trusts Law in Labuan 1996 was passed by the Malaysian government to ensure the confidentiality of the work of trusts in Labuan. Disclosure of trust in Labuan constitutes an offense.

The strategic location of Labuan in international waters makes it possible to work effectively and maintain international relations. Since the adoption of the Law on Offshore Trusts in Labuan in 1996, Labuan became a haven for offshore trusts, since it is possible here to effectively plan the payment of taxes and protect property in conditions of strict confidentiality and security. The state structure in Labuan is stable, Labuan is a financial center attracting offshore investments from all over the world.

Assignment of trusts in Labuan

– Asset Protection

– inheritance planning

– Benefits for children

– Benefits for employees.

The most frequently created trusts in Labuan

Currently, offshore founders most often create special trusts in Labuan. A special trust allows owners of the company in Labuan to hold there shares and shares of partners. Such trust is based mainly on the structure of the trust adopted in the British Virgin Islands. The main advantage of a special trust is that it allows both Malay and foreign founders to accept Malay assets, including stocks and insurance policies.

In addition, in Labuan you can create such trusts:

– Trust Trust

– Discretionary trust

– Charitable Trust.

The advantages of offshore trusts of Labuan

Some advantages (without limitations):

– Efficient property tax planning

– Lack of currency regulation

– Legality of trusts in Labuan

– The possibility of placing in trust of assets of various types, such as bank accounts, insurance policies, objects of intellectual property.

– Balanced Trust Law in Labuan with amendments in 2002

– Lack of property taxes and inheritance

– No capital gains tax

– There is no requirement for reporting of trusts in Labuan.

Differences Between An Offshore Foundation And An Offshore Trust

What is an offshore fund and what is an offshore trust?

An offshore fund is known as a “corporate alternative” to a trust. Regardless of whether the foundation is charitable or not, it provides a generally accepted system of asset protection in a wide variety of situations. Usually, a foundation is created in cases where jurisdiction does not have the ability to recognize a trust since this is contrary to the legislation of such jurisdiction. However, many offshore investors consider the fund a first-class choice for investment protection and tax planning.

What is the purpose of creating an offshore fund?

An offshore fund is similar to trust but has the form of a corporation. Immediately after its establishment, an offshore fund becomes a unique legal entity and acquires the qualities of a legal entity. This means that the fund does not belong to any one person, but operates under its own name, which allows it to enter into agreements with third parties, act as a plaintiff or defendant, open bank accounts and its own numerous companies. A foundation may be created for charitable activities or not for charitable activities; it may exist for a certain period of time. This property is attractive since the main purpose of creating a fund by an individual is to protect assets and protect against the right to an obligatory share in the inheritance mass. Further, many foundation organizations want to maintain a high degree of anonymity, and this is effectively achieved by creating a fund that manages the assets of the corporation. The fund provides a centralized and important asset management system for the fund and, in fact, provides optimal results by using effective tax planning within the framework of the legislation in force in the selected jurisdiction. Like a trust, a foundation can establish certain requirements that should be followed for the benefit of the beneficiaries under the act of establishing the foundation, which ensures compliance with current standards.

Who can benefit from using an offshore fund?

Offshore funds are usually created by individuals, family members or a group of people/organization. Most often non-profit corporations or charitable organizations are interested in creating a fund. In offshore jurisdictions, you can create any kind of funds and benefit from it. The advantages of creating funds in offshore include:

– whether the fund has a legal entity, the possibility of entering into agreements with third parties and the possibility of owning many other companies; 
– protection of property of the fund within the framework of the legislation of the offshore jurisdiction, which allows to avoid taxation and maintain a high degree of anonymity; 
– high levels of protection from outside claims; 
– the possibility of making contributions to the fund, not taxable; 
– the creation and development of strong public relations in the case of charitable foundations.

What is the main purpose of an offshore fund?

First of all, an offshore fund is designed to protect the personal condition and property of a corporation. Property management and tax planning allow you to manage the state most efficiently and profitably, and the fund is able to provide such services perfectly legitimate and safe. The funds not only protect their property but also impede the realization of the right to receive a share in the hereditary mass and sue in connection with such a right.

The funds are widely used for paying pensions, in schemes with shared participation of workers, in charitable activities of groups of people, they are convenient for collectors of works of art, stock options and when planning insurance.

You can keep various types of assets in an offshore fund, some of which (without limitation) include stocks and equity stakes in private and public companies, investment portfolios, real estate, intellectual property, bank deposits, and life insurance policies.

Like trusts, funds provide a high degree of confidentiality to all parties involved, and this is precisely the quality that potential investors in offshore companies wish to have. Moreover, funds can be created quickly and easily, contributions to them can be made without paying taxes, which is why they are so popular among charitable organizations.

How to create an offshore fund?

Offshore fund required: “founder”, “guarantor”, “beneficiary” and “members of the board.” The founder is an individual or a group of persons who establish a fund and contribute property to it, the guarantor (as in the case of a trust) acts as a controller for the operations and management of the fund, ensuring strict compliance of the fund’s activities with legal requirements, benefit from the activities of the fund, and, finally, members of the board are individuals who practically carry out activities and monitor the activities of the fund and the achievement of its goals. However, the fund does not need a trustee, participants or shareholders, which simplifies operations and speeds up all processes.

The way a fund is created depends on the type of fund and jurisdiction chosen. Currently, there are 4 types of offshore funds:

– Public funds 
– Private foundations 
– State funds 
– Mixed funds

Public funds are established by families, groups of individuals or organizations, while private funds are created by one individual as a rule when creating a private investment fund. Mixed-type funds can be created both by individuals and as a group of individuals or by family members, and are very flexible in their structure and organization of activities. There are fewer requirements for mixed funds, and they are similar to trusts in their characteristics. The main requirement for a mixed fund is that such a fund must have expenditure commitments of no more than $ 100.