LABUAN PRIVATE TRUST COMPANY

A Labuan Private Trust Company (PTC) means a trust in which each beneficiary of the trust is a connected person in relation to the settlor of the trust. A PTC is a Labuan company formed for the specific purpose of acting as trustee for a group of connected persons. In a PTC, the settlor, members of his family or his advisors can be appointed to the Board of Directors. The composition of the Board can be changed from time to time to bring in members of succeeding generations and in this way, involve them in the management of the family affairs.

Entry Requirement

  • To register a Labuan private trust company, the first step is to incorporate a Labuan company or a foreign Labuan company. An application for a license to operate a PTC must be submitted to The Authority using the specified form which requires the following:
    • Submission of a certified copy of the executed trust instrument
    • Submission of a letter of undertaking that it shall not carry out any trust company business other than with respect to the private trust or private trusts
    • Appoint a Labuan trust company as its agent
FeesAmount
Annual Fee RM5,000

Benefits of a PTC

  • A PTC is deemed as a Labuan entity under the Labuan Business Activity Tax Act 1990 (LBATA), hence it can benefit from the preferential tax treatment provided in LBATA; incentives under Income Tax Act 1967; and Stamp Duty exemptions accorded to other Labuan entities. These are as follows:
    • Income derived by the PTCs from trading activities would be subject to tax at the rate 3% of its net audited profits or RM 20,000, as elected
    • Income from non-trading activities, i.e. purely from investment holding is not subject to tax. However, if the PTC undertakes trading and non-trading activities, then the activities would be deemed as trading activities
    • Dividends received by PTC are tax-exempt
    • Payments made to non-residents by the PTC, such as management and technical fees are exempted from withholding tax
    • Fees paid to non-residents by PTC and which fall under Section 4(f) of the Income Tax Act 1967 are exempted from withholding tax
    • Instruments made by the PTC are exempted from stamp duties
    • Non-citizen and non-resident directors of the PTCs are exempted up to 100% of the Director's fees paid by the trust
    • Distributions received from a PTC by the beneficiaries are tax-exempt. In addition, a PTC can qualify as tax resident for Malaysian tax purposes if at least one of the trustees of the PTC is a Malaysian, thereby qualifying for the benefits of the Double Tax Agreements signed by Malaysia with more than 70 countries

Governance Legislation

The legislation governing the establishment of a Private Trust Company (PTC) in Labuan International Business and Financial Centre is in Division 4 of the Labuan Financial Services and Securities Act 2010 (LFSSA)