Labuan Foundations

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The Labuan Foundations Act of 2010 regulates the formation of foundations in Labuan as well as their administration and dissolution after they have been established.

What is a Labuan foundation?

A Labuan foundation is similar to a company in that it is a corporate body with a separate legal entity, established to hold assets in its own name to manage the assets for the benefit of its beneficiaries, or particular purposes, or both.

In most cases, it is utilised to administer private wealth and charitable activities.

A Labuan foundation has the following features:

  • The founder and beneficiaries may/may not be a resident of Malaysia.
  • Its charter must be duly signed by the founder.
  • Its properties are situated outside Malaysia unless otherwise approved by the Labuan Financial Services Authority (Labuan FSA), or it is a foundation for charitable purposes.
  • The main purpose is the management of property, and such purpose must be lawful to Malaysian public policy.

When the property of a Labuan foundation is located in Malaysia, any income derived is subject to taxation under the Income Tax Act 1967; however, when the property is located outside of Malaysia, such income is subject to taxation under the Labuan Business Activity Tax Act 1990.

One of the few common law jurisdictions in the Asia Pacific, the Labuan International Business and Financial Center (IBFC) caters to both trusts and foundations.

Therefore, as an alternative to setting up a trust, investors may instead form a foundation (which is frequently linked to a limited liability partnership), which will allow more control over the assets.

Trusts and foundations are differentiated as follows:

Labuan Foundations (Amendment) Regulations 2022

IN exercise of the powers conferred by subsection 80(1) of the Labuan Foundations Act 2010 [Act 706], the Minister, on the recommendation of the Authority, makes these Regulations, which come into operation on 1 January 2023.

Under these Regulations, the Labuan Foundations Regulations 2010 [P.U. (A) 418/2010] are amended by substituting for the Third Schedule the following schedule:

These regulations can be found here:-

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