FAQ on Labuan Private Foundation
We are glad to outline answers to the Frequently Asked Questions (FAQ) on Labuan Private Foundation, for your to understand more on how to ensure your objectives are met before you register the Labuan Private Foundation.
You can name your Labuan foundation according to your personal name with a logo (optional) or any name you prefer but the name of the foundation will be followed by “Labuan Foundation (L)” on the Registration Certificate.
Yes, you can appoint an individual or legal person as nominee founder.
No limit to the number of founders. The founder(s) can be an individual or corporate entity.
Yes, it can be a joint-name as well.
Yes, it can be done through a Deed of Assignment to be submitted to LFSA. Any changes of the assignee and agreement must notify LFSA within 30 days.
The degree of flexibility is governed by the Foundation Charter which can be changed from time to time depending on your needs.
Anyone appointed by the founder including the founder, beneficiary or company secretary. If the founder is the council member, he is allowed to direct and manage the Foundation assets. The secretary may be a council member at the same time provided that the secretary shall not be the sole council member.
1/Officer – primarily administrative as the officer is responsible for ensuring the proper administration of the foundation.
2/Secretary – performs all secretarial functions including filing and lodging of documents with Labuan FSA.
3/Council member – responsible for the general supervision of the foundation management and ensuring that the purpose for which the foundation was established is fulfilled in accordance with the charter, articles and the law. In effect, the council is similar to the Board of Directors of a company.
4/Supervisory person (optional) – to ensure the council members act in accordance with the charter as well as safeguard the Labuan foundation’s properties in line with its purpose and objective.
Officer and the Supervisory person cannot be the same person to avoid conflict of interest in performing their respective roles.
The founder can be the officer, provided he is not the council member. The founder can be the beneficiary.
Anyone including Company Secretary can be the officer appointed by the Founder during the registration. The officer can be a natural person or a corporate entity. The appointment must be consented with an appointment letter with a resignation notice of 30 days and lodged to the LFSA.
Yes, but the founder cannot be an officer in the Foundation.
An officer is appointed by the founder to be responsible for the administration of the Labuan Foundation.
You can have an appointment letter to clearly specify the scope of responsibility of the officer.
Yes, but the role of an officer is a must.
No limit. Their roles are similar to the directors of the company.
The appointment of a supervisor is optional. The supervisory person is appointed by the founder mainly to monitor the Council’s decision with the powers to add or remove Council members or Officers, etc.to the overall function of the Labuan Foundation.
The foundation will continue as long as the Charter permits it unless it mentions dissolve it when the founder has expired.
Council members, supervisory persons, officers, and approval auditors allowed to inspect the documents with the permission from the council members. They are kept in the Trust Company, who is your company secretary, situated in Labuan.
Allow endowing during or anytime after the set up of the foundation. The properties must be unencumbered, free of creditor claims or liens.
Labuan Foundation is regarded as a foreign entity. At such, the threshold per property will depend on the respective states, ie Kuala Lumpur property is RM 1million, Selangor is RM 2 million, etc.
The properties must be endowed into the Foundation within 60 days from the date of purchase, approval by LFSA often within 30 to 45 days
Rental income will be subjected to a corporate tax rate of 24% and has to meet the tax compliance under the ITA Act 1965. It is advisable to set up a local Malaysian Sdn Bhd company to collect rental in this regard for easier management.
Assets of every kind corporeal or incorporeal, moveable, immovable, tangible, intangible.
Legal documents or instruments of bank cheques, money orders, shares, securities, bonds, bank drafts and letter of credits
Once the founder endowed his properties they cannot be withdrawn back to him throughout its lifetime. Permission to sell is allowed as long as the charter permits it.
No claim if the assets are already endowed into the Foundation after 2 years’ period from the date of registration.
For investment holding it is zero tax with the submission of management account. For trading, the tax will be 3% with the audited report.
It is not advisable for Labuan Foundation to act as both an investment and a trading company.
However, if both prevail, the tax rate will be 3% with an audited report.
Yes, as investment holding of shares of Malaysian companies and purchase of Malaysian properties.
If it is a trading business in nature, it is permissible but the rate of corporate tax will be 24% and it will have to submit to local inland revenue with a new corporate tax file.
No withholding tax, no service tax, no inheritance tax, no GST for international trades.
Upon the declaration by the council members anytime when it deems fit and/or as distribution conditions stated in the Charter are met i.e. upon the death of founder or dissolution of the Foundation.
Only council members allow signing.
For investment holding it is not required. For trading, it would require the financial statement to be audited if you opt to be taxed under the 3% regime. The auditor must be appointed before 31st March to meet the Inland Revenue Board Corporate tax filing deadline of 31st May. The auditor can also be appointed if the council decides to have the financial statements to be audited.[
Annually on 31st December
A Labuan foundation shall be dissolved on the occurrence of any of the following events :
(a) the Labuan foundation is established for a fixed duration and that duration expires;
(b) the purpose of the Labuan foundation is fulfilled or becomes incapable of fulfillment, or
(c) any provision of the charter of the Labuan foundation so requires.
The officer(s) of the Labuan Foundation has to pass a resolution to effect the dissolution.
Yes, LFSA reserves the right to strike off the Foundation on overdue annual fee payment. If the annual fee is overdue for more than six months, there will be further penalty fees amounting to fifty percent of the annual fee.
Three(3) main compliance are:
a. Annual tax filing (by 31st March)
b. Annual return (one month before the anniversary of the date of incorporation)
c. payment of an annual fee to Labuan FSA (before the anniversary of the date of incorporation)
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