The formation of an offshore trust is generally for someone or a settlor to give specific property to a third party to be held for the benefit of others, including charities. The creation of a Shariah compliant trust is to provide an alternative for a settlor to exercise his rights in creating a trust in accordance with the Shariah principles.

The requirement is to ensure that the investment of the trust property is channeled to Shariah approved business or activities, the mode of acceptance of the trust property, the liquid investments, the long-term investments, the tenancy and relevant agreements thereto and the distribution are in line with Shariah principles.

Entry Requirement

  • The settlor can be any person as defined under Part I subsection 2(1) of LOTA. The settlor and beneficiaries can be an heir, non-heir or a corporate entity or organisation legally established or registered in any recognised jurisdiction. In addition to the provisions in LOTA, the followings are to be satisfied in forming a Shariah compliant trust in Labuan IBFC:
    • The settlor is a non-resident of Malaysia at the time the trust is created. A settlor may also be a beneficiary of a trust provided he is not the sole trustee of that offshore trust
    • The beneficiaries must be non-resident of Malaysia, unless the said trust is for charitable purposes as stipulated under Section 7 (2) of LOTA. Unless the context otherwise requires, all other provisions regarding qualification of the beneficiaries remain as per Section 22 of LOTA
    • The trust property does not include any immovable property situated in Malaysia, unless otherwise allowed by the relevant authorities and laws for the time being in force
    • At least one of the trustees must be a trust company registered under the Labuan Trust Companies Act 1990 (LTCA). The trustee may also be a beneficiary of an offshore trust provided he is not the sole trustee of that offshore trust

Governance Legislation

Labuan Trusts Act 1996 (LTA)