THE FUTURE OF TAX PLANNING AND WEALTH MANAGEMENT: TRANSPARENCY AND SUBSTANCE FOR ALL? - 8.30AM - 12.00PM
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THE FUTURE OF TAX PLANNING
AND WEALTH MANAGEMENT:
TRANSPARENCY AND SUBSTANCE FOR ALL?
Thursday, 16 March 2017
8.30AM – 12.00PM
Sasana Kijang, Conference Hall 1
VIDEO
WELCOME REMARKS
by
Danial Mah Abdullah,
Chief Executive Officer, Labuan IBFC Inc.
THE DRIVE TO TRANSPARENCY:
THE CHANGING LANDSCAPE OF
INTERNATIONAL TAX PLANNING
by
Chee Pei Pei, Partner, Financial Services & Insurance
Leader – Tax, Deloitte Malaysia
Tan Hooi Beng, Partner, Corporate Tax/International Tax,
Deloitte Malaysia
Common Reporting Standard (CRS) on Automatic Exchange of Information (AEOI) Are you ready? Chee Pei Pei Deloitte Tax Services Sdn Bhd
Agenda
CRS: Overview
CRS: How it impacts you?
6
© 2017 Deloitte Tax Services Sdn Bhd
CRS: Overview
7
© 2017 Deloitte Tax Services Sdn Bhd
Automatic Exchange of Information
How does it works?
Controlling
Person(s) Exchange of
information
Entity Account
Holders Domestic tax authorities
Foreign tax authorities
in countries of Account
Holders and Controlling
Reporting Persons
Due
Diligence
Reporting Financial
Institutions
• FIs to review &identify reportable accounts (based on tax residency of account holders/
Individual Account controlling parties)
Holders • FIs to report on reportable accounts to the domestic tax authority
• Domestic tax authority will share information with foreign tax authorities
8
© 2017 Deloitte Tax Services Sdn BhdAutomatic Exchange of Information
Signatories of Multilateral Competent Authority Agreement
Signed (53)
Anguilla Faroe Islands Latvia Seychelles
Argentina Finland Liechtenstein Slovak Republic
Barbados France Lithuania Slovenia
Belgium Germany Luxembourg South Africa
Bermuda Gibraltar Malta South Korea Committed (1)
British Virgin Islands Greece Mexico Spain
Bulgaria Greenland Montserrat Sweden
2017 Trinidad & Tobago
Cayman Islands Guernsey Netherlands Turks & Caicos
Colombia Hungary Niue United Kingdom
Croatia Iceland Norway
Curacao India Poland
Cyprus Ireland Portugal
Czech Republic Isle of Man Romania
Denmark Italy San Marino
Estonia Jersey
Signed (34) Committed (13)
Albania Chile Japan Saint Lucia
Andorra China Kuwait Saint Vincent & Grenadines Bahamas Panama
Antigua & Barbuda Cook Islands Malaysia Samoa Bahrain Qatar
Aruba Costa Rica Marshall Islands Saudi Arabia Brunei Darussalam Singapore
Australia El Salvador * Mauritius Sint Maarten Dominica Turkey
2018
Austria Grenada Monaco Switzerland Hong Kong (China) UAE
Brazil Ghana Nauru Uruguay Lebanon Vanuatu
Belize Indonesia New Zealand Macau (China)
Canada Israel Russia
*announcement of signing made – date not released.
© 2015 Deloitte & Touche LLP 9
© 2017 Deloitte Tax Services Sdn BhdCRS Implementation
Development in Malaysia
List of specific
low risk Due diligence
Introduced new Malaysia has accounts as and collection
Section 132B signed the Excluded of CRS
via Finance Act MCAA in Jan Accounts to information
2014 2016 be gazette by will start on 1
June 2017 July 2017
2014/2015 2016 2017 2018
Penalty for non-compliance was IRB met up Reportable First
announced in the Budget 2017 with FIs to jurisdiction reporting
- Gazetted via Finance Act 2017 share list will be is due on
updates on issued by 30 June
15 Feb the IRB by 2018
Income Tax Rules and Orders on 2017 15 Jan
AEoI were released on 23 Dec 2018
2016
10
© 2017 Deloitte Tax Services Sdn BhdCRS in Malaysia
Recent Updates
• Income Tax (Convention on Mutual Administrative Assistance in Tax Matters) Order 2016
- Gazette on 23 December 2016
- To legalise the fact that the Government of Malaysia has signed MAA to foster all forms of
administrative assistance in matters concerning taxes of any kind.
- One of the form of the “administrative assistance” is exchange of information.
• Income Tax (Multilateral Competent Authority Agreement on Automatic Exchange of Financial
Information) Order 2016
- Gazette on 23 December 2016
- To formalise that the Government of Malaysia has signed MCAA with a view of exchanging
information that is foreseeably relevant in relation to taxation.
- Over 99 countries have signed on the MCAA.
- Reportable jurisdiction list will be issued by the IRB by 15 January 2018.
• Income Tax (Automatic Exchange of Financial Account Information) Rules 2016 –.
- Gazette on 23 December 2016
- Every Reporting FI shall identify Reportable Account by applying due diligence procedures specified
in the CRS.
- “16 Options” addressed.
- Go-Live 1 July 2017
• Labuan Business Activity Tax (Automatic Exchange of Financial Account Information)
Regulations 2017 – Pending public release.
• Guidance Notes on CRS - Will there be one?
• Reportable jurisdiction list – by 15 January 2018
11
© 2017 Deloitte Tax Services Sdn BhdAutomatic Exchange of Information
Who reports – reporting financial institutions
The scope of financial institutions subject to CRS is broad -
Reporting Financial Institutions
Depository institutions Entities that accept deposits in the ordinary course
(e.g. Commercial banks) of a banking or similar business
Custodial institutions Entities that hold financial assets for the account of
(e.g. Nominee companies) others
Investment entities Entities (i) whose primary business involves certain
(e.g. Investment banks, asset asset management or financial services for or on
managers, unit trusts) behalf of a customer or (ii) whose gross income is
primarily attributable to investing, reinvesting or
trading in financial assets, if the entity is managed
by another financial institution
Specified insurance companies Insurance companies that issue or are obligated to
(life insurers) make payments for cash value insurance contracts
or annuity contracts
12
© 2017 Deloitte Tax Services Sdn BhdAutomatic Exchange of Information
Who is reported – reportable accounts
Reportable Accounts
Accounts held by
Reportable Persons
Reportable Persons
• A tax resident individual or entity in a reportable jurisdiction.
Passive NFE (non-financial entity)
• any NFE that is not an Active NFE
• more than 50% passive income & more than 50% assets producing
passive income - dividends, interest, rents royalties)
Accounts held by a
Passive NFE with
Controlling Persons
that are Reportable
Persons
Controlling Persons
• Natural person who exercises control (25%) over an entity
• In case of a trust, Controlling Persons means the settlor, protector,
beneficiary(ies). Similar application for legal persons functionally
similar to trusts (e.g. foundations)
13
© 2017 Deloitte Tax Services Sdn BhdAutomatic Exchange of Information
What is required from you?
Type of account What is required
Individual accounts • Declaration of tax resident status via a
which includes self certification form
controlling person of a
passive NFE • Required to state reason if you do not
have a tax identification number.
• Be prepared to be questioned by the FI
relationship managers especially if your
account with the FI exceeds USD1m.
• Monitor for any changes in tax residents –
You may be a tax resident of Malaysia last
year but can be a tax resident of another
country this year.
14
© 2017 Deloitte Tax Services Sdn BhdAutomatic Exchange of Information
What is reported - information to be reported
Information required to be reported in relation to individual and entity account holders
and controlling persons
Identification Account information Financial information
information
• Name • Account number • Account balance or value
• Address • Name and identifying • Interest, dividends and other
• Jurisdiction of number of the FI income generated with respect
residence to the assets held in the
• TIN account
• Date of birth • Proceeds from the sale /
• Place of birth redemption of financial assets
paid or credited to the account
15
© 2017 Deloitte Tax Services Sdn BhdAutomatic Exchange of Information
When is it reported - timeline
2015 2016 2017 2018 2019
New
Jan 1, 2016 █
accounts
2017 adopters
Review high value preexisting December 31, Note:-
individual accounts 2016 █ If account was
First automatic exchange of information between September, 2017 closed during
jurisdictions █ the year, the
account balance
Review preexisting low value individual accounts Dec 31, 2017 █
or value prior to
Review preexisting entity accounts Dec 31, 2017 █ closure.
New accounts Jan 1, 2017 █
2018 adopters
Review high value preexisting individual accounts Dec 31, 2017 █
First automatic exchange of information between jurisdictions Sept 30, 2018 █
Review preexisting low value individual accounts Dec 31, 2018 █
Review preexisting entity accounts Dec 31, 2018 █
New accounts July 1, 2017 █
Review high value preexisting individual accounts June 30, 2018 █
Malaysia
First reporting to Inland Revenue Board June 30, 2018 █
First automatic exchange of information between jurisdictions Sept 30, 2018 █
Review preexisting low value individual accounts June 30, 2019 █
Review preexisting entity accounts June 30, 2019 █
16
© 2017 Deloitte Tax Services Sdn BhdCRS: How it impacts you?
17
© 2017 Deloitte Tax Services Sdn BhdImplications on Malaysian HNWI
Overview
1 The AEoI will lead to full disclosure of
offshore financial assets
AEoI may lead to an increased number
2 of tax audits and the IRB will have
access to the information on financial
assets kept outside Malaysia.
3 Prepare defense for potential audit.
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© 2017 Deloitte Tax Services Sdn BhdImplications on Malaysian HNWI
Potential Questions from IRB
From income or capital? E.g. loans
and advances.
Where did the funds Sources within Malaysia or from
come from? outside Malaysia?
Income reported to tax in Malaysia or
unreported?
Provide supporting documents/evidence - bank statements, saving pass
books, cheque butt, credit card statements, sale and purchase
agreements, loan agreements etc.
19
© 2017 Deloitte Tax Services Sdn BhdImplications of CRS
Example 1: HNWI with offshore financial assets
Funds/Monies • Income
in Malaysia • Bank loans
• Advances from company
• Unreported income – self or company
Wire
transfer
USD1m to
Australia
Malaysia
Australia 2017:
2010:
2013: USD50m
Placement
Trading in balance in
in fixed
shares bank
deposits
account
2012: Buy
real
property
20
© 2017 Deloitte Tax Services Sdn BhdImplications of CRS
Example 2: Simple trust structure in Malaysia
Trustee
MY tax resident
Malaysian Trust
FD Placements
Individual A Individual B
Settlor Beneficiary
MY tax resident MY tax resident
Bank XYZ Question: Which are the
Switzerland reportable accounts that will
be reported to the IRB by the
Swiss tax authorities?
21
© 2017 Deloitte Tax Services Sdn BhdImplications of CRS
Example 3: Simple trust structure offshore
Trustee Individual C
BVI tax resident Beneficiary
MY tax resident
BVI Trust
Individual A FD Placements
Settlor
MY tax resident Entity B
Beneficiary
MY tax resident
Passive NFE (non-
Bank ABC financial entity)
Question: Malaysia Individual B
1. Who is responsible to • any NFE that is not 50% shareholding
an Active NFE UK tax resident
report to IRB? • more than 50%
2. Who will be reported to passive income &
IRB? more than 50%
assets producing
passive income -
dividends, interest, 22
rents royalties)
© 2017 Deloitte Tax Services Sdn BhdDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/my/about for a more detailed description of DTTL and its member firms. Deloitte provides audit, consulting, financial advisory, risk management, tax and related services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 225,000 professionals are committed to making an impact that matters. Deloitte serves 4 out of 5 Fortune Global 500® companies. About Deloitte Southeast Asia Deloitte Southeast Asia Ltd – a member firm of Deloitte Touche Tohmatsu Limited comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam – was established to deliver measurable value to the particular demands of increasingly intra-regional and fast growing companies and enterprises. Comprising 270 partners and over 7,300 professionals in 25 office locations, the subsidiaries and affiliates of Deloitte Southeast Asia Ltd combine their technical expertise and deep industry knowledge to deliver consistent high quality services to companies in the region. All services are provided through the individual country practices, their subsidiaries and affiliates which are separate and independent legal entities. About Deloitte in Malaysia In Malaysia, services are provided by Deloitte Tax Services Sdn Bhd and its affiliates. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. © 2017 Deloitte Tax Services Sdn Bhd
Headline
The DriveVerdana Bold
to Transparency: The Changing
Landscape of International Tax Planning
Tan Hooi BengSubstance and Transparency © 2017 Deloitte Tax Services Sdn Bhd
Case Study
(Trading in Jinjang)
26
26
© 2017 Deloitte Tax Services Sdn BhdCase Study
Ah Beng Sdn Bhd
−Shareholders are Malaysian individuals
−Trading of cosmetics
−Import from Italy, France and China, export to India, Vietnam and US (sells to distributors there)
−Also sells to Malaysian market (sells to local distributors)
−The personnel/director handling the purchase/sales transactions are based in Jinjang’s sales office
−Sales orders from customers are received and confirmed in Malaysia
−Negotiations re purchase/sales mainly in Malaysia via phone/emails
−Sales proceed received in Malaysia
−Goods do not physically enter Malaysia (except for those sold to Malaysian customers)
ISSUE:
ARE THE TRADING PROFITS SUBJECT TO
MALAYSIAN CORPORATE TAX?
IF YES, WHY?
IF NO, WHY?
27
27
© 2017 Deloitte Tax Services Sdn Bhd
27Case Study (Cont’d) 1##: Ah Beng, I have a
brilliant tax planning idea.
Why don’t you incorporate a
company in the BVI. The
2##: Wow, that sounds to good to be modus operandi of the trading
true. Are you sure that this tax planning of cosmetics can remained
unchanged, i.e. all your
idea will work? I don’t want to be in the buy/sell activities can continue
hot soup though….. in Jinjang. But, the profits
now will be booked in the BVI
Co. Overall, there is no tax as
Insert BVI is a tax-free country.
Ah Beng the client Joe the tax agent
28
28
© 2017 Deloitte Tax Services Sdn BhdCase Study (Cont’d)
ISSUE:
IS THE TAX PLANNING
IDEA WORKABLE ?
29
29
© 2017 Deloitte Tax Services Sdn BhdBVI = International Offshore Financial Centres
(IOFC)?
30
30
© 2017 Deloitte Tax Services Sdn Bhd31
31
© 2017 Deloitte Tax Services Sdn BhdInternational Trading Company
Foreign
Supplier Foreign
s Customers
Malaysian Trading Co
Sale
Sale#
#1
CIT 2
24%
Foreign Foreign
Suppliers Customers
Sale# International Trading Co
Sale#
1
2
• Suitable location – LABUAN IBFC??
• Economic substance
• Negotiation/conclusion of contract
• Permanent establishment risk
32
• Anti-avoidance rules 32
© 2017 Deloitte Tax Services Sdn BhdLabuan Global Trading Company
• Economic substance
• Office, facilities, assets
• Personnel
• Location of top management
• Bank account
• Negotiates contract
• Concludes contract
• Purchasing order confirmation
• Sales order confirmation
• Invoicing
Supplier of • Sales proceeds
perfumes (e.g. • No buy/sell dealings with Malaysian residents
USA, China,
Japan etc) Sell
Labuan Global
Sell
Pay Trading Buyer/
Company Customer
Pay
(e.g. in India,
Europe etc)
Physical flow
33
33
© 2017 Deloitte Tax Services Sdn BhdBEPS Action 6: Preventing the granting of treaty benefits in inappropriate circumstances: The end of treaty shopping? © 2017 Deloitte Tax Services Sdn Bhd
What led to Action 6
Treaty shopping - lowering withholding taxes (WHT) payable
Example 1 - Indofood’s case
Loan
SPV
Mauritius 0% WHT on
interest
Netherlands 100%
SPV BV CO
Loan
Loan
Mauritius Interest WHT @ Interest WHT @
Indonesia 20% 100% 10%
100% Indonesia
IND CO IND CO
35
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© 2017 Deloitte Tax Services Sdn BhdWhat led to Action 6 (Cont’d)
Treaty shopping - lowering withholding taxes (WHT) payable
Example 2
MY CO
Dividend WHT @
Malaysia 0%
MY CO
Country Y 100%
Malaysia Dividend
100%
Country X Withholding tax Y CO
(“WHT”) @ 30%
X CO Dividend WHT @
Country X 100%
10%
X CO
36
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© 2017 Deloitte Tax Services Sdn BhdWhat led to Action 6 (Cont’d)
Treaty shopping – transactions that circumvent the application of
the treaty rule that allows source taxation on disposal of shares
Example – before the amendment of the India-Mauritius tax treaty**
MY CO
Disposal of shares
Malaysia
in MU Co - no
Mauritius 100% CGT in MY; no
CGT in Mauritius
MY CO Disposal of MU CO
unquoted shares
Disposal of shares in
Malaysia in IN Co held for
India IN Co - will only be
100% long term – 100%
India taxable in Mauritius
subject to 10%
(the country of
capital gains tax
residency); no CGT in
IN CO (CGT) in India, no IN CO Mauritius
CGT in Malaysia
• **Note: India has renegotiated with Mauritius and as a result of the re-negotiation, India gets
taxing rights on capital gain income arising on shares of an Indian company acquired on or
after April 1, 2017 (with concession on share investments made up to March 31, 2017) 37
37
© 2017 Deloitte Tax Services Sdn BhdEconomic Substance
“Treaty shopping” generally refers to arrangements
through which a person who is not a resident of one
of the two States that concluded a tax treaty may
attempt to obtain benefits that the treaty grants to
residents of these States.
These strategies are often implemented by
establishing companies in States with desirable tax
treaties that are often qualified as “letterboxes” “shell
companies” or “conduits” because these companies
exist on paper but have no or hardly any substance in
reality.
38
38
© 2017 Deloitte Tax Services Sdn BhdEconomic Substance
• Examples of steps to build substance
The establishment of the company or the arrangement of the transaction
structure / scheme is not aimed solely at utilizing the double taxation
agreement (board resolutions etc could provide an indication)
The company’s business activities are managed by its own management
which has sufficient authority to perform transactions
The company must have its own employees, management team and own
set of board of directors.
The company has an active business or activities (issue: what constitute
active business for holding company?)
Company to incur relevant costs such as payroll cost, rental etc
Proper and adequate capitalization (share capital)
Board meetings to be held in the country
To maintain bank accounts in the country
To ensure that books/records are properly kept in the country
39
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© 2017 Deloitte Tax Services Sdn BhdWhat’s next?
• Treaty shopping will become very difficult as anti-treaty shopping conditions
will be added to treaties:
−Principal purpose test (PPT)
−Limitation on benefits (LOB)
• Proper economic substance in the holding companies?
• Special purpose companies in treaty locations will generally not qualify for
treaty benefits
−Should group structures be flattened?
• Any offshore claims by companies within the group?
40
40
© 2017 Deloitte Tax Services Sdn BhdContact Details
Tan Hooi Beng
Partner, Business Tax and International Tax
Tel: +603 7610 8843
Mobile: +6017 333 0891
Email: hooitan@deloitte.com
41
© 2017 Deloitte Tax Services Sdn BhdDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see http://www.deloitte.com/my/about for a more detailed description of DTTL and its member firms. Deloitte provides audit, consulting, financial advisory, risk management, tax and related services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 225,000 professionals are committed to making an impact that matters. Deloitte serves 4 out of 5 Fortune Global 500® companies. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. About Deloitte in Malaysia In Malaysia, services are provided by Deloitte Tax Services Sdn Bhd and its affiliates. © 2017 Deloitte Tax Services Sdn Bhd
PRIVATE WEALTH MANAGEMENT
BEYOND LEGAL TRADITIONS
AND CONVENTIONS
by
Millie Chan
Senior Consultant, Asia Pacific Markets
Borden Ladner Gervais LLP1. Wealth and Estate Planning:
Key Concerns
1.1 Asset protection and preservation:
Adverse claims.
Claims arising from marital breakdown.
Country and political risks.
Imposition of exchange control.
Expropriation and nationalization.
441. Wealth and Estate Planning:
Key Concerns
1.1 Asset protection and preservation (cont’d):
Spendthrift beneficiaries.
Beneficiaries with special needs.
1.2 Tax minimization:
In home country.
Beneficiaries in taxing jurisdictions (e.g. USA,
Canada, Australia, U.K.).
451. Wealth and Estate Planning:
Key Concerns
1.3 Preservation of family wealth:
Transition of wealth:
Division of family wealth among family
members of the next generation
Stewardship of family wealth for succeeding
generations.
461. Wealth and Estate Planning:
Key Concerns
1.4 Family business:
Avoiding fragmentation of ownership.
Encouraging participation in management by
succeeding generations.
Solution: Asset Protection Structure
471. Wealth and Estate Planning:
Key Concerns
1.5 Preservation of family as a whole:
Legacy of family’s “intangible assets”:
Family identity.
Family vision.
Family values and tradition, etc.
Solution: Family Governance Structure
482. Commonly Found Components
of an Estate Plan
2.1 In our experience, existing estate plans are
generally incomplete and may not address key
concerns, such as:
Planning is often domestic, not global.
Transfer of assets is often direct (by gifts or wills),
not indirect (through protective structures).
Focus is on who will own assets, not on how the
assets can be used to benefit the family across
generations.
Assets often receive more attention than heirs. 493. An Estate with No Plan
Real Estate Real
Assets Estate
Company
Business Operating
Founder
Assets Company
Financial Investment Founder
Assets Company Family
504. Asset Protection Structure
Real Estate Real
Assets Estate
Company
Founder
Asset
Business Operating Holding Protection
Assets Company Company Entity
Founder
Family
Financial Investmen
Assets t Company
515. Choices of Structures
5.1 There are various options for choice of structure, such
as:
The common law trust.
The civil law concept of foundation.
A structure involving private trust company.
526. Common Law Trust
6.1 Concept of Trust
Classic doctrine of common law jurisdiction.
A Trust is a legal relationship between Settlor, Trustee and
Beneficiary.
Created when Settlor transfers property to Trustee to be
managed for benefit of Beneficiary.
A Trust is not an autonomous juridical person and is
represented by Trustee.
536. Common Law Trust
6.1 Concept of Trust (cont’d):
Trust involves a split in legal and beneficial ownership of
trust property.
Trustee (legal owner) has the right to deal with trust
property but has an equitable obligation to deal with it for
the benefit of Beneficiary (beneficial owner).
With split ownership, trust property is not available to
creditors of Trustee.
Terms of a Trust are usually contained in a trust instrument
which is kept confidential.
546. Common Law Trust
6.2 Parties in a Trust:
Settlor
Settles the trust by transferring property to Trustee.
Trustee
Legal owner of trust property but is legally obliged to
manage trust property for benefit of Beneficiary – the
duty of loyalty.
Beneficiary
Beneficiary has equitable or beneficial entitlement to
trust property which enforceable by law.
557. Common Law Trust Structure
– Real Life Example
Trustee
Common Discretionary Beneficiaries – may include
Settlor Law Trust
Settlor
Represented Protector
by Trustee Advisory Committee
Holding
Company Midshore/
Offshore
Onshore
Real Estate Operating Investmen
Company Company t
Company
568. Labuan Trusts
8.1 Labuan Trusts Act 1996: provides for creation and
recognition of Labuan Trusts.
8.2 Special features include:
Trustee must be a Labuan trust company.
Trust property may include Malaysian property with
the approval from Labuan Financial Services
Authority.
Must be created by will or other instrument in
writing.
Express recognition of reserved powers trust. 578. Labuan Trusts
8.2 Special features (cont’d):
Registration of Labuan Trust is optional.
Duration of Labuan Trust: limited or perpetual.
Unenforceability of foreign claim or judgment.
Statutory provision for secrecy and proceedings in
camera.
Redomiciliation of foreign trust.
Migration of Labuan Trust.
589. Civil Law Concept of
Foundation
9.1 Concept of a Foundation:
Originated from civil law jurisdiction.
Foundation is established through a process of
registration with requisite documents.
Foundation is a juridical person.
Foundation is both the legal and beneficial owner
of its property.
599. Civil Law Concept of
Foundation
9.1 Concept of a Foundation (cont’d):
Foundation has no shareholders or members:
Foundation and its property are managed by a
council/officers in line with Foundation’s charter,
articles and applicable law.
Foundation may be established for a specific purpose
and to provide for beneficiaries.
Foundation bears characteristics of both a company
and a trust – sometimes referred to as an
“incorporated trust”.
6010. Civil Law Concept of
Foundation – Real Life Example
Founder Founder’s rights
Purpose: To advance interests of the family
Directors/ Beneficiaries in the discretion of the Founder
Council
Foundation
Protector
Members Advisory Committee
Holding
Company
Midshore/
Offshore
Onshore
Real Operating Investmen
Estate Company t Company
Company
6111. Labuan Foundations
11.1 Labuan Foundations Act 2010 (“LFA”): provides for
establishment, regulation and dissolution of
Labuan Foundations.
11.2 Constituent documents:
Charter registered as a public document and
contains information such as Foundation’s name,
objects, duration.
Articles: a private document that outlines the way
Foundation should be managed and administered
including identification of beneficiaries, distribution
of property to beneficiaries. 6211. Labuan Foundations
11.3 Parties in a Labuan Foundation:
Founder
Founder establishes Foundation and transfers
initial assets to Foundation.
Property of Foundation may include Malaysian
property with approval from Labuan Financial
Services Authority or unless Foundation is for
charitable purposes.
Founder may reserve rights and powers and may
transfer such rights or powers.
6311. Labuan Foundations
11.3 Parties in a Labuan Foundation (cont’d):
Officers
It is mandatory to have at least one Officer, initially
appointed by Founder.
Founder or Beneficiary who is not a Council Member
may be an Officer.
Officers are to administer the Foundation to achieve its
purposes or objects.
6411. Labuan Foundations
11.3 Parties in a Labuan Foundation (cont’d):
Secretary
It is mandatory to have a Secretary.
Secretary must be a Labuan trust company.
Beneficiary
The party who may receive distributions from
the Foundation as determined by Founder.
Beneficiary has no equitable or beneficial
entitlement to the property of the Foundation.
6511. Labuan Foundations
11.3 Parties in a Labuan Foundation (cont’d):
Council and Council Members
Appointment of Council is optional. If there is a
Council, the Council represents Foundation.
Council Members are initially appointed by
Founder. In some jurisdictions (not for Labuan),
a member of the Council must be a person with
specified qualifications.
Council ensures compliance by Foundation and
its Officers with terms of constituent
documents and the Act and responsible for its
general supervision. 6611. Labuan Foundations
11.3 Parties in a Labuan Foundation (cont’d):
Supervisory Person
A Supervisory Person may be appointed to
have supervisory powers over Foundation in
addition to or in lieu of the Council.
6711. Labuan Foundations
11.4 Special provisions include:
Duration of Foundation: limited or perpetual
existence.
Unenforceability of foreign claim or judgment.
Statutory provision for secrecy and proceedings
in camera.
Redomiciliation of foreign foundation.
Migration of Labuan Foundation.
6812. Uses of Trusts and
Foundations
12.1 Both trusts and foundations are viable alternatives
for achieving financial and estate objectives.
Asset protection.
Asset preservation.
Succession planning.
Confidentiality.
Consideration of tax efficiency.
Avoidance of forced heirship.
6913. Example of Estate Plan: Status
Quo
Labuan Labuan
Hong Kong Singapore Malaysia
Family
Holdco
100%
Sibling #1 Sibling #2 Sibling #3 Sibling #4
7014. Example of Estate Plan:
New Structure
Sibling #1 Sibling #2 Sibling #4 Sub-
Family Family Sibling #3 Family Structures
Foundation Foundation Family Trust Foundation
Beneficiaries
Main Labuan Main Structure
Foundation
Labuan
Holdco
Labuan Labuan
Family
Holdco
Sibling #1 Sibling #2 Sibling #3 Sibling #4
7115. Example of Estate Plan:
Optional Distribution Trust
Beneficiaries: All
members of the four
branches of the Distribution
Family Trust
Beneficiary
Sibling #1 Sibling #2 Sibling #4 Sub-
Family Family Sibling #3 Family Structures
Foundation Foundation Family Foundation
Trust
Beneficiaries
Main Labuan Main Structure
Foundation
Labuan
Holdco
Labuan Labuan
Malaysia Malaysia
Family
Holdco
72Borden Ladner Gervais LLP
Contact Information
Millie Chan Wai Yen, Lawyer, Senior Consultant, Asia Pacific Markets
Direct Tel: + 1.604.632.3411
Direct Fax: +1.604.662.5324
Email: mchan@blg.com
Vancouver Office:
1200 Waterfront Centre
200 Burrard Street
P.O. Box 48600
Vancouver, British Columbia
Canada V7X 1T2
Website: www.blg.com
73PANEL DISCUSSION
The Future of Tax Planning and Wealth Management:
Transparency and Substance for All?
Moderator:
Hiu Chee Fatt, Director, Business Development, Labuan IBFC Inc.
Panelists:
Chee Pei Pei, Partner, Financial Services & Insurance Leader – Tax, Deloitte Malaysia
Millie Chan, Senior Consultant, Asia Pacific Markets, Borden Ladner Gervais LLP
Khairudin Abdul Rahman, Chairman, Association of Labuan Banks
Tan Hooi Beng, Partner, Corporate Tax / International Tax, Deloitte MalaysiaSASANA KIJANG KUALA LUMPUR 16 – 17 AUGUST 2017 (1.5 Days) EARLY BIRD SPECIAL AT RM 200 BY 31 MAY 2017 FOR MORE INFO: acc@libfc.com
Thank You
Disclaimer
This presentation should not be regarded as offering a complete explanation of the
matters referred to and is subject to changes in law. It is not intended to be a substitute
for detailed research or the exercise of professional judgment. Labuan IBFC cannot accept
any responsibility for loss occasional to any person acting or refraining from action as a
result of any material in this presentation. The republication, reproduction or commercial
use of any part of this presentation in any manner whatsoever, including electronically,
without the prior written permission from Labuan IBFC Inc. is strictly prohibited.
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OFFICIAL AGENCY ESTABLISHED
BY
GOVERNMENT OF MALAYSIA TO
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