Labuan: Types of Company
An offshore trust can be created by a will or other instrument of writing including a unilateral declaration of trust. The duration of an offshore trust shall not exceed 100 years unless otherwise provided in the terms of the trust. A foreign trust may be enforceable, recognised or registered in Labuan. Similarly, a Labuan offshore trust can be transferred to another country.
Labuan trusts are regulated under the Labuan Offshore Trusts Act 1996 ("the Act"). The Act was gazetted and commenced operation on 31 October 1996. An offshore trust which is validly created in accordance with the Act, whether in Labuan or abroad, may be registered with the Labuan Offshore Financial Services Authority. A registered offshore trust is subject to the provisions of the Act.
In November 2001, the Association of Labuan Trust Companies Malaysia (ALTCM) persuaded the Board of the Labuan Offshore Financial Services Authority (LOFSA) to change the status of Labuan trust firms from domestic to offshore companies.
Previously, trust companies in Labuan were incorporated under the regular Companies Act unlike other offshore entities which are incorporated under the Offshore Companies Act 1990 which meant that the trust companies paid higher taxes. By being offshore companies the trust firms are able to enjoy a more attractive tax structure, having to pay only a 3 per cent tax of their net audited profit.
In February 2008, an Exposure Draft was published to provide guidance on the requirements to be observed by all offshore trusts created under the Labuan Offshore Trusts Act 1966 (LOTA) and managed under Shariah principles. The Exposure Draft aimed to ensure that Shariah compliant offshore trusts created in the Labuan IBFC are based on necessary requirements under LOTA and Shariah principles.