Key terms in trust law, Labuan corporate structures, and wealth planning, explained in plain language. A reference for clients, advisers and anyone navigating Labuan's regulatory landscape.
This glossary is intended as a general reference. It does not constitute legal or financial advice. Please contact us for advice specific to your situation.
A set of regulations and procedures that financial institutions, including licensed trust companies, are required to follow to detect and prevent financial crime. In Labuan, AML/CFT compliance is overseen by the Labuan FSA.
The three pillars of financial crime compliance required of all Labuan FSA licensees: Anti-Money Laundering, Counter Financing of Terrorism, and Counter Proliferation Financing.
The natural person who ultimately owns or controls an entity or asset, even if the legal title is held by someone else (such as a nominee). Identifying beneficial ownership is a key component of KYC and AML compliance.
Malaysia's central bank, which sets monetary policy and regulates financial institutions operating under Malaysian law. Distinct from Labuan FSA.
A professional certification jointly awarded by the Asian Institute of Chartered Bankers (AICB) and Asian Banking School (ABS) for anti-money laundering and counter-terrorism financing compliance professionals.
The activities that must physically take place in Labuan for an entity to meet economic substance requirements under the Labuan Business Activity Tax Act.
The individual designated within a Labuan FSA-regulated entity to be responsible for day-to-day AML/CFT/CPF compliance, including monitoring, reporting, and policy implementation.
A treaty between two countries that determines how income earned in one country by a resident of another is taxed, to prevent the same income being taxed twice. Malaysia has an extensive DTA network of over 70 agreements, which Labuan entities can access under certain conditions.
A pass issued to the spouse and minor children (under 18) of an Employment Pass holder in Labuan, allowing them to reside in Malaysia for the duration of the EP.
An annual income statement issued by an employer to an employee in Malaysia, used for personal income tax filing with the Inland Revenue Board.
A regulatory requirement for certain Labuan entities to demonstrate that they have genuine business activity in Labuan. This includes maintaining a physical presence, employing adequate staff, and incurring operating expenditure in Labuan. Economic substance requirements were introduced to align with international standards set by the OECD and FATF.
A fund administered by SOCSO in Malaysia that provides financial assistance to employees who lose their jobs.
A work permit that allows a foreign national to take up employment with an organization registered in Labuan IBFC. Requires Labuan FSA approval before issuance by the Immigration Department.
Malaysia's mandatory retirement savings scheme. Labuan employers with resident staff must contribute to EPF.
A legal entity established under the Labuan Foundations Act 2010. Unlike a trust, a foundation is a separate legal person that holds its own assets. It is commonly used for asset protection, charitable purposes, and succession planning. A foundation has a charter, a council, and may have a protector and beneficiaries.
The constitutional document of a Labuan private foundation, equivalent to the articles of association of a company. Sets out the foundation's purpose, governance, and rules.
The regulator for all financial services entities operating within Labuan IBFC. Issues and oversees trust company licences, fund manager licences, and other financial licences.
Malaysia's national training and development fund. An HRD Corp Exempted Trainer is recognized to deliver training that qualifies for employer levy claims.
Labuan IBFC is Malaysia's designated offshore financial centre, established under the Labuan Offshore Business Activity Tax Act 1990 and governed by the Labuan FSA.
The tax authority responsible for income tax collection, including from Labuan entities subject to Labuan Business Activity Tax.
A mandatory due diligence process that financial institutions and licensed trust companies must carry out before onboarding a client. KYC involves verifying the identity of the client, understanding the nature of their business, and assessing potential risks. Standard KYC documents include a certified passport copy and proof of address.
The primary tax legislation governing Labuan entities. Trading companies are taxed at 3% of audited net profits; non-trading entities pay no business activity tax.
A company incorporated in Labuan under the Labuan Companies Act 1990. Labuan companies can be used for a wide range of international business activities. They benefit from a low tax rate, flexible ownership structures, and access to Malaysia's DTA network.
The Labuan Financial Services Authority. The regulatory body responsible for licensing and supervising financial institutions operating in Labuan IBFC, including trust companies, banks, insurance companies, and fund managers.
Labuan International Business and Financial Centre. Malaysia's midshore financial jurisdiction, established in 1990 and located on the island of Labuan off the coast of Sabah. It offers a range of entity structures, a low tax environment, and a robust regulatory framework for international business and wealth planning.
The main legislation governing licensed financial services entities in Labuan IBFC, including trust companies, fund managers, insurance companies, and banks.
A person or entity that holds a directorship or shareholding on behalf of the actual beneficial owner, under a nominee agreement. The use of nominees is common in offshore and midshore structures for administrative efficiency and privacy. Nominee arrangements must be properly documented and the beneficial owner remains the true owner of the assets.
A pass issued to the common-law spouse, parents, parents-in-law, and adult children of an Employment Pass holder in Labuan. Valid for one year and renewable.
An individual or entity appointed in a trust deed to oversee the trustee and hold reserved powers, such as the ability to remove and replace the trustee.
The individual or entity that establishes a trust by transferring assets to the trustee under the terms of a trust deed.
Malaysia's social security institution that provides protection to employees in the event of workplace accidents, occupational diseases, or disability.
Companies Commission of Malaysia. The regulator for company secretaries and corporate entities registered under Malaysian law (distinct from Labuan FSA).
A legal arrangement in which a settlor transfers assets to a trustee, who holds and manages those assets for the benefit of one or more beneficiaries. A trust is not a separate legal entity; ownership of the assets is vested in the trustee. Trusts are widely used for asset protection, succession planning, and privacy.
The legal document that establishes the terms of a trust, setting out the roles and powers of the settlor, trustee, protector and beneficiaries, and the conditions for asset distribution.
The person or company that holds and manages trust assets on behalf of the beneficiaries. A licensed trust company such as Signature Trust Ltd acts as a professional trustee, meaning it holds a licence from the relevant regulatory authority (in our case, the Labuan FSA) to provide trustee services.
We are happy to explain any concept in detail and advise on how it applies to your specific situation.