The origins of trust can be traced back to 13th-century English law. A trust materializes when assets or properties are entrusted to a trustee, who holds them for the benefit of someone else. The individual who initiates the trust, known as the "Settlor," typically transfers these assets or properties to create what is termed a trust fund. The trustee then safeguards the trust fund, catering to the exclusive benefit of a group of individuals referred to as the "beneficiaries." Central to this arrangement is the trust deed, which governs the trust.

The core elements of a trust involve the Settlor relinquishing ownership of the assets or properties transferred into the trust. The trustee, in turn, becomes the legal owner of the trust fund, while the beneficiary is recognized as the beneficial owner.

Labuan trusts find their legal foundation in the Labuan Trusts Act 1996 (“LTA”) (updated in 2010) and the Labuan Islamic trusts established under Section 105 of the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA) within the Labuan International Business and Financial Centre (“IBFC”). Guidelines from the Labuan Financial Services Authority (“FSA”) provide essential directives regarding the establishment of Labuan trust and Islamic trust.

Labuan trusts can be established through various written instruments, including a will or a unilateral declaration. While trusts are typically irrevocable, there could be instances where the settlor may retain the power to revoke the trust, though this could impact the intended benefits.

• Purpose Trust
• Charitable Trust
• Labuan Special Trust
• Spendthrift or Protective Trusts
• Reserved Powers Trusts
• 
  

Trusts offer a versatile solution for individuals, families, corporations, and non-profit organizations to meet their diverse objectives.

Any person, be it an individual or a corporation, resident or non-resident of Malaysia, can set up a Labuan trust.

Labuan trusts encompass all kinds of assets, whether corporeal or incorporeal, movable or immovable, tangible or intangible. This includes legal documents or instruments in any form, even electronic or digital forms, that evidence title to or interest in such property. For Malaysian property, prior approval from Labuan FSA is necessary.

• Settlor: The initiator who transfers assets or properties into the trust, be it an individual or a corporate entity.
• Trustee: Holds the trust funds and is responsible for its administration for the benefit of the beneficiaries. At least one (1) trustee must be from a Labuan trust company or Labuan managed trust company.
• Beneficiary: The individual entitled to enforce and benefit from the trust, which can encompass individuals, references to a class, charities, minors, corporations, etc.
• Protector: Appointed by the settlor, acts as a "watchdog" over the trustee for the benefit of the beneficiary. The settlor or beneficiary may also serve as a protector.
• 
  

A Labuan trust can exist for a fixed period or in perpetuity, as specified by the terms of the trust. Additional terms may be specified to alter the duration of the trust during its lifetime.

The Labuan Business Activity Tax Act 1990 (“LBATA”) governs the imposition, assessment, and collection of tax on Labuan business activity conducted in, from, or through Labuan. The taxation system offers favorable regulations for Labuan business activities.

As of January 1, 2019, Labuan entities engaged in Labuan business activities must meet specific substance requirements, including having an adequate number of full-time employees in Labuan and meeting annual operating expenditure criteria.

Labuan entities are permitted to engage in transactions with residents of Malaysia in Ringgit Malaysia, subject to certain provisions and deductions.

• License Processing Fee (One-time): USD350
• Annual License Fee: USD6,500 (payable annually)

This comprehensive insight into Labuan trusts emphasizes their versatility and adaptability to diverse financial and organizational goals.