How To Set Up an Offshore Trust in Malaysia
In recent times, amid fluctuations in the Malaysian Ringgit (MYR) and shifts in the global financial landscape, offshore trust have emerged as a compelling option for Malaysian investors seeking to diversify their wealth and safeguard assets. The MYR has experienced significant depreciation, potentially causing assets denominated in MYR to drop by as much as 45% in the last 10 years.
| Year | Exchange Rate (Average: 1 USD to MYR) | Percentage Change |
|---|---|---|
| 2014 | 3.27 MYR | – |
| Present | 4.72 MYR | 44.35% |
Notable personalities in Malaysia have also embraced offshore trusts for their potential benefits. This comprehensive guide explores the process of establishing an offshore trust in Malaysia, considering the MYR currency drop, and highlights how influential individuals in Malaysia have utilized offshore trusts to optimize tax efficiency and asset protection.
| Name | Position/Association | Involvement in Pandora Papers |
|---|---|---|
| Daim Zainuddin | Former Finance Minister | Linked to multiple companies and trusts in the BVI, jointly holding assets worth at least £25 million (RM141 million). Sons, daughter, third wife, and business associates named as owners of offshore companies. |
| Zafrul Aziz | Finance Minister | Named director of Capital Investment Bank (Labuan) Limited, a boutique bank incorporated in Labuan, although claims to have relinquished position eleven years ago. Seeks legal counsel regarding allegations, asserting the ability of individuals to open accounts with licensed banks. |
| Ahmad Zahid Hamidi | UMNO President | Named director of BVI firm Breedon Limited in 1996, with company subsequently dormant for several years. Denies tax evasion attempts, citing investments in a “prominent country.” |
| Yamani Hafez Musa | Deputy Finance Minister | Former director of Great Ocean Consultants in the BVI alongside siblings. Father, former Sabah chief minister, took over as sole director in 2015. Company sold in 2016. |
| G Gnanalingam | Cargo Company Owner | Owns BVI firm Paisley Marketing Limited, dissolved after being gifted to daughter. Ranked No. 13 on Forbes “Malaysia’s 50 Richest 2021” list with a net worth of US$1.8 billion. |
| William Leong | Former Party Treasurer | Administrator of Collister Holdings Ltd in Jersey, managing income during tenure as executive vice president of Philippine National Steel Mill. Linked to BVI firm Maxcorp (Asia) Overseas Ltd. |
| Mahmud Abu Bekir | Son of Sarawak Governor | Named in Pandora Papers through directorship of family business, BVI company Rondinmass Incorporated, holding commercial properties in Seattle and Washington worth US$35 million. |
| Tiong Hiew King | Timber Company Founder | Listed as owner of IB Holdings Limited, a Cook Islands company involved in investment and timber products trading. |
| Larry Low Hock Ping | Parent of Jho Low | Linked to BVI companies Coswell Corporation and Strategic Equities Limited, with combined shares worth US$7 million. |
| Lim Kok Thay | Genting Group Chairman | Linked to BVI company Azure Supreme Limited, though the nature of its business remains undisclosed. |
Source: Coconuts (2021-10-06)
Step 1: Understanding Offshore Trusts
Before delving into the process, it’s essential to grasp the fundamentals of offshore trusts. An offshore trust is a legal entity established in a jurisdiction outside of Malaysia, typically in jurisdictions renowned for their favorable regulatory frameworks and tax benefits. Such trusts serve various purposes, including wealth preservation, succession planning, and confidentiality.
Step 2: Choosing the Right Offshore Jurisdiction
Selecting the appropriate jurisdiction for your offshore trust is paramount. Factors to consider include the jurisdiction’s legal system, political stability, regulatory environment, and tax laws.
Major offshore destination in the world in 2022.
Source: Statista
In 2022, Switzerland emerged as the leading offshore destination for private wealth globally, with Hong Kong and Singapore following closely behind. During that period, offshore assets in Switzerland reached approximately 2.4 trillion U.S. dollars. Timeless International Family Office maintains offices or professionals in all major leading offshore destinations including Switzerland, Singapore, Hong Kong, Shenzhen, Taipei, Kuala Lumpur, Dubai, London, Vienna, Geneva, the British Virgin Islands, the Cayman Islands, and the Marshall Islands.
Step 3: Engaging Offshore Trust Professional Services in Malaysia
Given the complexity of establishing an offshore trust, engaging professional services is highly advisable. Seek assistance from reputable law firms, trust companies, or financial advisors specializing in offshore structuring. These professionals can provide expert guidance on trust formation, compliance requirements, and ongoing administration. It’s important to note that there are limited offshore trust service providers in Malaysia.
Timeless International Family Office is one of the recent entrants, having opened their office in Kuala Lumpur on March 23, 2024. Due to the complexity involved, meeting face to face with professionals is often preferred for a thorough discussion and understanding of your needs
Local trusts, such as those offered by Rockwill and UBB Amanah, may differ from offshore trusts in certain aspects. Offshore trusts, in particular, may offer added benefits compared to local trusts. We will delve deeper into this topic in future discussions. Join our newsletter for more update.
Option 1: Setting Up with Agency Assistance
Step 4: Engage the Offshore Trust Agency in Malaysia
Simply fill out the necessary forms and provide the offshore trust agency with the required information. They will then prepare all the necessary documents based on your input. Once everything is set up, you’ll open your offshore trust account system, ensuring all details are accurate. After confirming payment, a quick follow-up call ensures smooth processing. Legal experts from the agency will assist you in drafting the trust deed, detailing terms, objectives, and beneficiaries. As a bonus, you can also apply for a credit card linked to your offshore trust account. Once all paperwork is signed and submitted, your offshore trust account will be activated effortlessly.
You are done!
Option 2: Setting Up Independently
Step 4: Drafting the Trust Deed
Drafting the trust deed independently requires close collaboration with legal experts. You’ll need to invest time and effort in ensuring that the document is comprehensive and tailored to your needs, addressing key considerations such as asset protection provisions and succession planning arrangements.
Step 5: Selecting Trustee(s) and Settlor(s)
The selection of trustee(s) and settlor(s) is a critical aspect of trust formation. Trustees play a fiduciary role in managing trust assets and executing the trust’s terms, while settlor(s) establish the trust and may contribute assets. Choose trustees with a solid reputation for professionalism, integrity, and expertise in trust administration.
Step 6: Funding the Offshore Trust
Once the trust is established, it must be funded with assets. This typically involves transferring assets such as cash, securities, real estate, or other investments into the trust’s name. Take care to comply with all legal and regulatory requirements governing asset transfers, including documentation and reporting obligations.
Step 7: Compliance and Reporting
Maintaining compliance with relevant laws and regulations is essential for the ongoing operation of an offshore trust. Be aware of reporting requirements, tax obligations, and other compliance matters applicable to both the trust and its beneficiaries. Regularly review the trust’s structure and operations to ensure continued compliance with evolving regulatory standards.
Step 8: Monitoring and Review
Effective management of an offshore trust requires ongoing monitoring and review. Stay abreast of changes in regulatory environments, tax laws, and economic conditions that may impact the trust’s operations or objectives. Periodically assess the trust’s performance, structure, and asset allocation to ensure alignment with your financial goals.
Is Establishing an Offshore Trust from Malaysia the Right Move for You?
Setting up an offshore trust in Malaysia offers numerous benefits, including asset protection, tax optimization, and enhanced privacy, embodying the principles of Dark Forest Logic. By following these steps and leveraging professional expertise, Malaysian investors can establish a robust offshore trust structure to safeguard their wealth and achieve their financial objectives.
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