Labuan Trust Company - One of its kind
Introduction
According to the Encyclopedia Britannica and Merriam Webster dictionary, the term "Trust Company" represents an entity which acts as an agent or trustee in a trust structure which involves the securing or transfer of assets. Examples of trust companies in Malaysia are companies licensed under the Trust Companies Act 1949. These companies provide services such as private and corporate trusteeship or manage collective investment schemes which is money pooled by investors with similar investment objectives.
Labuan Trust Company
In contrast to a Malaysian Trust Company (MTC), a Labuan Trust Company (LTC) is a different creature altogether. A LTC is a specialised entity within the regulatory framework of Labuan International Business and Financial Centre (Labuan IBFC). It operates under a distinct license granted by the Labuan Financial Services Authority (Labuan FSA) - Section 60 Labuan Financial Services and Securities Act 2010). In accordance with Labuan FSA's Guidelines for The Establishment Of Labuan Trust Companies (revised in 2015), a full-fledged LTC must maintain a minimum of two trust officers and establish a physical presence in Labuan IBFC. Additionally, it is mandated to maintain a prescribed level of paid-up capital, typically set at RM150,000. Labuan Trust Companies (LTCs) are the gatekeepers and act as reliable service providers within the Labuan IBFC financial ecosystem.
Distinction between a Malaysian Trust Company and a Labuan Trust Company
Services
According to the Trust Companies Act 1949, a trust company in Malaysia may act as an executor for estates and apply for distribution of property, be an administrator, receiver and manager, liquidator, guardian of property, act as trustees in a trust structure, act as an agent for management and control of properties, decide and make investment decisions on trust funds set up by executors, administrators and trustees, and to act as custodian for properties such as moneys, jewelry, documents, deeds, debentures, titles and other assets, will drafting, trust structuring, estate and tax planning. Conversely, LTCs offer a wide spectrum of services crucial for international businesses navigating Labuan IBFC's regulatory framework. These encompass entity incorporation and registration, management and accounting support, nominee services for key roles, acting as registered offices, company secretarial services, and fulfilling trustee functions within trust structures, including managing LTCs. Perhaps the biggest distinction between an MTC and a LTC is that an MTC caters to Malaysians. A LTC caters to an international audience.
Taxation Framework
In Malaysia, trust companies operating within the local jurisdiction are subject to taxation according to the Income Tax Act of 1967. These companies are obliged to pay a corporate income tax rate of 24%. On the other hand, trust companies based in Labuan IBFC are taxed under the Labuan Business Activity Tax Act of 1990. They benefit from a special tax rate of 3%, contingent upon compliance to specific substance requirements. According to the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021, the requirements include maintaining a physical office presence in Labuan IBFC, employing at least three individuals in Labuan IBFC, and meeting a minimum annual operating expense threshold of RM120,000.
Legal and Regulatory Framework
MTCs are supervised by the Companies Commission of Malaysia whereas a LTC is supervised by the Labuan FSA.
Business as a Labuan Trust Company
AAE International Trust Ltd., as one of the trust companies in Labuan IBFC, focuses on five key aspects: secretarial services, work permit application submissions for Labuan entities, custodial services, small family office setups, and wealth management planning alongside financial license advisory services. The provisioning of financial license advisory services resonates deeply with AAE Trust's mission, recognising the untapped potential within the financial licensing segment. Labuan IBFC presents a plethora of licensing opportunities spanning banking, insurance, fund management, capital markets, wealth management, money broker (managed exchanges), credit tokens, payment gateways, trust companies, managed trusts as well as Labuan International Commodity Trading Companies (LITCs) which deal with commodities such as petroleum and petroleum-related products including liquefied natural gas, minerals, agriculture products, refined raw materials, chemicals, base materials and coal.
Obtaining a license from Labuan IBFC not only boosts client confidence but also demonstrates commitment to robust regulatory standards upheld by its governing body, the Labuan FSA.
Labuan IBFC offers a myriad of business opportunities, and it also serves as a launchpad for various exciting ventures. Whether these involve managing funds through a private fund structure, operating forex or cryptocurrency exchanges under a money broker license, obtaining an investment bank license, or venturing into the digital realm with a digital bank license or digital wrapper, Labuan IBFC provides a conducive environment.
The key considerations in financial license applications revolve around the strength of the management team entrusted with overseeing the financial portfolio and services associated with the license. It is imperative that the qualifications of the management team align closely with the financial portfolio of the business, encompassing relevant work experience in the field. Equally important is the genuine commitment to conducting business with integrity and sincerity.
Obtaining a license from Labuan IBFC not only boosts client confidence but also demonstrates commitment to robust regulatory standards upheld by its governing body, the Labuan FSA.
Labuan IBFC offers a myriad of business opportunities, and it also serves as a launchpad for various exciting ventures. Whether these involve managing funds through a private fund structure, operating forex or cryptocurrency exchanges under a money broker license, obtaining an investment bank license, or venturing into the digital realm with a digital bank license or digital wrapper, Labuan IBFC provides a conducive environment.
The key considerations in financial license applications revolve around the strength of the management team entrusted with overseeing the financial portfolio and services associated with the license. It is imperative that the qualifications of the management team align closely with the financial portfolio of the business, encompassing relevant work experience in the field. Equally important is the genuine commitment to conducting business with integrity and sincerity.
AAE Trust specialises in guiding entrepreneurs through the business structuring process and facilitating the acquisition of a financial license from Labuan FSA. For more information, please contact:
