I INTRODUCTION

The recent covid-19 pandemic has altered the way we live in the most unprecedented manner. To contain the novel virus, Malaysia like many other nations imposed a partial lockdown, known here as the Movement Control Order. Sectors and industries that do not fall under the essential list were effectively not in operation or business for two to three months. On 19 June 2020, Malaysia recorded a remarkable recovery rate of 93.8 per cent out of the total number of 8,529 infections. Currently, Malaysia is gradually recovering from the impact of covid-19 and interstate travels have been permitted during the Recovery Movement Control Order, which takes effect from 9 June 2020 until 31 August 2020. While Malaysians celebrate reuniting with loved ones, the risk of a potential second wave in other parts of the world continues to pose a threat to Malaysia's economic recovery. Many businesses are reducing their existing workforce, with airlines, hotels and travel industries being especially affected. Interestingly, it is also during this period that Malaysians are witnessing e-commerce and rubber glove industries thriving; the emergence of two new billionaires in the Bloomberg Billionaires Index from the latter is particularly noteworthy.2 More than ever, high net worth individuals are becoming increasingly aware of the importance of managing the two inescapable certainties in life – death and taxes – and the need to ensure a smooth transition of their wealth to the next generation.

II TAX

i Personal taxation

Taxation in Malaysia is primarily governed by the Income Tax Act 1967 (ITA). Unlike the United States, for instance, the scope of taxation in Malaysia is based on a territorial system. Prior to year of assessment 2004, the scope of taxation for an individual depends on his or her residence status. An individual is resident in Malaysia for the basis year for a particular year of assessment if he or she is in Malaysia in that basis year for a period or periods amounting in total to 182 days or more.3 A resident individual is taxed on both incomes accrued in or derived from Malaysia and income received in Malaysia from outside Malaysia.4 On the other hand, a non-resident individual would be given an exemption on income received in Malaysia from outside Malaysia.

From year of assessment 2004 onwards, an individual, whether he or she is a resident or not would be taxed on income accruing in or derived from Malaysia.5 In contrast, a resident company in Malaysia that carries on banking, insurance, and air/sea transport businesses will be taxed on a worldwide basis.6 Although the residence status of an individual taxpayer does not affect the scope of individual taxation, resident individuals enjoy certain advantages over non-resident individuals such as personal reliefs, tax liabilities at graduated tax rates (where tax is charged progressively from the first 5,000 ringgit earned) and relief from double taxation (as afforded by double taxation agreements). On the contrary, non-resident individuals are taxed at the flat rate of 30 per cent on their income7 from business, trade or profession, employment, interest and rents.

The highest tax rate for a resident individual is now 30 per cent on annual income in excess of 2 million ringgit.8 As there is currently no inheritance tax or capital gains tax in Malaysia, the common types of taxable income for individual taxpayers are income from business or profession, employment, rent, royalties, pensions and annuities.

Employment income of an individual is deemed to be derived from Malaysia if the employment is exercised in Malaysia.9 Under the ITA,10 employment is defined as: (1) employment in which the relationship of master and servant subsists; or (2) any appointment or office, whether public or not and whether or not that relationship subsists, for which remuneration is payable.

Common types of employment income include wages, salary, remuneration, leave pay, commission, bonus, gratuity, perquisite, allowance (whether in monetary or otherwise), employment benefits or amenity, enjoyment of accommodation provided by employer and compensation for loss of employment, etc.11

A partnership and a sole proprietorship are not recognised as separate legal entities from the individuals who form it for Malaysian income tax purposes. Accordingly, the income derived from sole proprietorships and partnerships will be taxed at the graduated rates at individual level. In a partnership, each partner is assessed based on his or her share of the partnership income as if it is a sole proprietorship business. Each partner has to include his or her share of the partnership income in his or her personal tax return.12 However, it is the precedent partner of the partnership who is required to file a return on the partnership's income (Form P) on an annual basis.13

ii Gift

As a general rule, personal gifts are not taxable in Malaysia. However, where a gift received is incidental to an office, employment or service performed, the gift received would be taxable. If the gift involved is a property made inter vivos, the transfer of the property may attract stamp duty. The Malaysian government recognises that family members, especially as between parents, children and spouses often transfer properties to one another out of love and affection and without any monetary consideration. Accordingly, a 50 per cent remission is given on stamp duty chargeable on any instrument of transfer executed between parents and children provided that the recipient is a Malaysian citizen.14 Further, any instrument of transfer for properties executed between spouses are fully exempted from stamp duty.15

Although there are no capital gains tax in Malaysia, gains derived from disposal of real property or shares in real property company are subject to Real Property Gains Tax (RPGT). The transfer of assets between spouses, parents and children, or grandparents and grandchildren will not attract RPGT if the disposer is a citizen, as the disposer shall be deemed to have received no gains and suffer no loss.16

iii Succession

As mentioned earlier, there is currently no inheritance tax in Malaysia, the Estate Duty Enactment 1941 having been repealed many years ago, on 1 November 1991. Although there have been some discussions by the previous administration (Pakatan Harapan Government) on the possible reintroduction of wealth and inheritance tax,17 there is no concrete proposal by the current Perikatan Nasional Government to do so, to date. In this regard, Malaysia does not currently impose taxes on the accumulated wealth of a deceased individual. The executor is required to notify the Inland Revenue Board (IRB) of the demise of the deceased and file the tax returns for the estate of the deceased until completion of the administration of the estate.

In general, gratuities, Employee's Provident Fund withdrawals, life insurance payments and distributions made to the beneficiaries are not taxable under the ITA. However, where annuities are payable by an executor of a deceased individual, the annuities would be taxable at the hands of the recipients.18

As for RPGT, the devolution of the assets of a deceased person on his or her executor or legatee under a will/intestacy or on the trustees of a trust created under his or her will similarly does not attract RPGT as the disposal price of the property would be deemed equal to the acquisition price in such a case.19

iv Cross-border developments

When an individual who derives income from Malaysia is a foreign national or resident of another country, income tax may be payable in both Malaysia and the other country. In Malaysia, the Ministry of Finance is empowered under the ITA to enter into double taxation agreement (DTA) with any other country to avoid double taxation.20 Currently, Malaysia has 74 effective DTAs while six other DTAs have been gazetted but have yet to come into force.21

For resident individuals, a bilateral relief will be given for foreign tax imposed on income taxable in Malaysia, if there is a DTA in place. If there is no DTA in place, a unilateral tax relief may be given to a resident individual for foreign tax imposed on income derived in Malaysia. The tax relief is deducted against total tax chargeable in arriving at the tax payable.

For non-resident individuals, the IRB has issued its Public Ruling No. 2/2012 on Tax Treaty Relief for Foreign Nationals Working in Malaysia. The Employment Article Dependent Personal Service Article in the DTA generally allocates taxing rights of employment income to the country of source (where the employment is exercised) or the country of residence (where the employee resides) on income from employment. Income from employment derived by an individual who is a resident of a contracting country may be taxed in another country if the employment is exercised in that other country. However, where employment at the other country is on a short-term basis, exemption would be granted if the following conditions are met (please note that the conditions may vary from country to country):

  1. the foreign national is present for a period not exceeding 183 days in Malaysia in aggregate in any 12-month period commencing or ending in the fiscal year concerned;
  2. the remuneration of the foreign national working in Malaysia is paid by or on behalf of an employer who is not a resident of Malaysia; or
  3. remuneration is not borne by a resident or permanent establishment in Malaysia.

If any of the above is not satisfied, the employment income of the foreign national will be subject to tax in Malaysia.

Following Malaysia's entry into the OECD Inclusive Framework (IF) on Base Erosion and Profit Shifting (BEPS) as an Associate Member in 2017,22 Malaysia, in principle, is committed to implementing and adhering to this international standard. One of the key action plans laid out by the OECD is the Automatic Exchange of Information between tax authorities. A common reporting standard had been developed by the OECD as a single global standard for this purpose.

In line with the above, Malaysia has enacted the Income Tax (Automatic Exchange of Financial Account Information) Rules 2016, Income Tax (Automatic Exchange of Financial Account Information (Amendment)) Rules 2017 and Labuan Business Activity (Automatic Exchange of Financial Account Information) Regulations 2018, which compel Malaysian financial institutions to collect and report to the IRB financial information of non-residents. The IRB will exchange this information with participating foreign tax authorities in the non-residents' home countries. In turn, the IRB would receive financial account information on Malaysian residents from other countries' tax authorities, thus reducing opportunities for offshore tax evasion. As of 15 January 2020, there are 67 reportable jurisdictions, including Australia, China, Switzerland and the United Kingdom.23

Apart from financial information, where there is a DTA in place, the Income Tax (Exchange of Information) Rules 2011 allows foreign tax authorities to request information about any person from the IRB. The request must include, among others, the identity of the person, period of information requested, a statement of the information sought, the tax purpose for which the information is requested, and the grounds for believing that the information requested is found in Malaysia or is in the possession or control of a person within the jurisdiction of Malaysia.

III SUCCESSION

i Overview

Though death is universal, the laws of succession varies from one jurisdiction to the other. As a former settlement of the British empire, Malaysia is heavily guided by English common law.24 Thus, the fundamental principle of English succession law – 'freedom of testamentary disposition' – is applicable in Malaysia but limited to non-Muslims.25

Non-Muslim

A non-Muslim can dispose their estate to whomever they wish without being subjected to forced heirship rules so long as there is a valid will in place.26 The requirements of a valid will under Malaysian law is set out under the Wills Act 1959.27 A will is automatically revoked upon marriage28 or upon conversion to Islam. In the case of the former, unless the will contains a 'contemplation of marriage' clause, the testator should prepare a new will.

The importance of a will is manifold. Among others, it facilitates fast and cost-efficient administration of the estate whereas the lack of it may result in estates being left unclaimed.29 In the absence of a valid will or where there is intestacy, the distribution of the estate of the deceased is governed by the Distribution Act 1958, which is also not applicable to Muslims.30 In the circumstances where a deceased was domiciled in a foreign country at the time of his or her death, the distribution of movable property (e.g., shares, cash, vehicles and jewellery) shall be regulated by the law of that foreign country.31 The rules on distribution in Malaysia recognises seven classes of family members that are entitled to the estate, each ranked in order of priority.32 In the event the deceased died without any surviving relatives as classified under the Distribution Act 1958, the government shall be entitled to the whole of the estate.

Muslim

The law of succession for Muslims in Malaysia is governed by Islamic personal and family law (i.e., Shariah law).33 As distribution of inheritance and the proportioning of assets for Muslims are to be in accordance with the 'faraid' principle,34 only one-third of the total value of the estate may be distributed to persons other than the Quranic heirs by way of an Islamic will (without obtaining the consent of each and every Quranic heir).35

Administration of estate

Following the death of the deceased, it is important to obtain letters of representation pursuant to the Probate and Administration Act 1959 to deal with the assets of the deceased. Institutions such as banks and the land office are unlikely to entertain applications pertaining to assets of the deceased otherwise. Depending on whether the deceased died testate or intestate, application for either probate or letters of administration is to be filed at the High Court. Over the last few years, the Malaysian judiciary has ramped up speed in attending to and disposing of cases. This has resulted in applicants obtaining grant of probate or letters of administration within a month or two of filing.36

In certain circumstances, upon an application being made, the Malaysian courts also have the discretionary power under the Inheritance (Family Provisions) Act 1971 to make reasonable provisions for the maintenance of dependant family members of the deceased.37 This is irrespective of provisions made under the will as well as entitlement under intestacy law.

ii Key changes and applicable changes affecting personal property

No major changes to the law of succession have taken place in recent years. The last significant development would be the amendments to the Distribution Act 1958 by parliament in 1997.38 These amendments, among others, recognised equality between genders and also improved the rights of parents of an intestate deceased and the rights of the children of a deceased intestate woman.39

iii Cross-border developments

As a member of the Commonwealth, Malaysia allows the re-sealing of a foreign probate or letters of administration granted by a court of competent jurisdiction in a Commonwealth member state and the same can be done vice versa.40

Unlike the EU Regulation on Succession and Wills,41 the Association of Southeast Asian Nations (ASEAN) of which Malaysia is a part, has not executed a treaty of any kind that recognises cross-border laws of succession. As only three out of 10 ASEAN member states are part of the Commonwealth, there is no legislation that facilitates easy cross-border administration of estates with the remaining seven. With globalisation 4.0 underway,42 it is high time for ASEAN countries to work towards harmonising laws of succession.

IV WEALTH STRUCTURING and REGULATION

There is a Chinese adage that goes: 'Wealth does not survive three generations', with the same sentiments expressed in different but similar sayings across the world. Legal development over the decades, however, has seen the rise of a multitude of instruments to cater towards a diverse range of wealth structuring needs. Individuals who simply wish to have some basic form of estate planning in place can opt for relatively simple options like wills, while high net worth (HNW) individuals may employ more sophisticated devices such as trusts and foundations to achieve a wider range of objectives, including asset protection, spendthrift protection, tax planning and succession planning. Malaysians are generally better aware these days of the benefits of having a will and the complications that can arise for the families of those who have died intestate. Meanwhile, Malaysia's offshore (Labuan) wealth structuring options are also becoming increasingly viable choices for HNW individuals and families.

i Common vehicles for wealth structuring

Onshore

Besides creating a will (as addressed above) for the purposes of estate planning, another common vehicle for onshore wealth structuring is the creation of trusts.

Trusts
What are they?

Trusts are instruments that can be set up for long-term wealth management purposes during the settlor's lifetime. Settlors are individuals who settle (i.e., create) a trust by setting aside assets to be held by trustees on behalf of the beneficiaries to the trust. While allowing settlors to ensure that the arrangement instituted reflects their wishes during their lifetime, some settlors may not appreciate the loss of control they would have over the trust assets; a necessary element for a trust to be properly constituted.

Trusts also do not require court approval to set up and implement (unlike the grant of representation required for the execution of a will) provided that the statutory requirements43 are duly complied with. The court will, however, maintain a supervisory jurisdiction over the trust and beneficiaries may exercise their rights against the trustees by recourse to the courts where aggrieved.44 Trusts can take a myriad of forms, such as fixed trusts (where the entitlement of the beneficiaries are fixed by the settlor through the terms of the trust) or discretionary trusts (where the trustees are given some degree of discretion on the distribution of trust property or income to the beneficiaries), or combinations of both. Trusts and wills are not mutually exclusive instruments, and individuals may find a combination of both to be useful in meeting their particular needs.

Tax treatment

While a trust exists, the trustees shall be regarded as the trust body for income tax purposes and treated as a chargeable person under the ITA.45 The income of the trust is subject to tax separately from the income received by the beneficiaries, with income from any source forming part of the trust property being treated as income of the trust and with any entitlement of a beneficiary under a trust being treated as his or her source of income under the trust.

A trust will only be regarded as resident in Malaysia for the basis year of a year of assessment if any of the trustees were resident for that basis year.46 However, where the trust was created outside Malaysia by a non-Malaysian person or persons, the income of trust had been wholly derived from outside Malaysia in that basis year, the trust had been administered for the whole of that basis year outside Malaysia, and at least one-half of the number of trustees have not been resident in Malaysia for that basis year, the trust shall not be regarded as resident in Malaysia for that basis year.47 Income tax is charged on the trust body at the fixed rate of 24 per cent of its chargeable income,48 similar to the tax rate charged on a company.

Offshore

Labuan trusts

In addition to onshore trusts, resident or non-resident private wealth clients also have the option of setting up trusts in the Federal Territory of Labuan, Malaysia's offshore jurisdiction. Labuan trusts are governed by the Labuan Trusts Act 1996 (LTA) and cannot include Malaysian property as part of the trust property unless prior approval is obtained from the Labuan Financial Services Authority, or unless the trust is established for charitable purposes.49 Where trust property includes Malaysian property, any income from the trust property shall be subject to the ITA.50 Where trust property does not include Malaysian property, any income from the trust property would be subject to tax under the Labuan Business Activity Tax Act 1990 (LBATA).51 In the case of a trust that includes both Malaysian and non-Malaysian property, it appears from the wording of the LTA that the entire income of the trust would be subject to the ITA.

Importantly, unlike the Trustees Act 1949 for onshore trusts, the LTA expressly provides for the appointment of a protector52 who must be consulted by the trustee in the exercise of his or her powers under the trust. The appointment of a protector may be desirable to settlors who wish to maintain a degree of control and supervision over the trustees in the management and administration of the trust. Further, the LTA also allows for the establishment of Labuan Special Trusts.53 In essence, Labuan Special Trusts allow for company shares to be held indefinitely by the trust while still allowing the company to be run and managed by its directors without intervention of the trustee. Unlike onshore trusts or normal Labuan trusts, trustees of Labuan Special Trusts also have significantly limited duties and liabilities in respect of their role over the trusts.

Foundations

In addition, the Labuan Foundations Act 2010 allows for the establishment of foundations as an alternative to trusts. Similar to trusts, the property of a foundation ceases to be the property of a founder (in the case of trusts, the settlor) upon endowment to the Labuan foundation. However, unlike a trust where the legal and beneficial ownership is split between the trustee and the beneficiary, the Labuan foundation will hold both the legal and beneficial title of its property. Further, for individuals who desire more control than is possible under the trust (even with the incorporation of letter of wishes or protectors), the Labuan foundation may appear attractive by allowing him or her to draft the charter of the foundation in accordance with his or her wishes. A founder of a Labuan foundation may also be appointed as a council member.54 Labuan foundations are also subject to the LBATA 1990 with the tax imposed at the rate of 3 per cent for Labuan trading activities, while Labuan non-trading activities will not be chargeable to tax in Labuan.

ii Regulation

The use of private wealth structuring devices like trusts has come under increasing scrutiny and regulatory pressure in recent years with their secretive nature creating concerns regarding money-laundering and tax avoidance.

In Malaysia, the legislating of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 has endowed the authorities with wide powers to investigate and prevent money laundering and terrorism financing offences, and the freezing, seizure and forfeiture of property involved in such offences.

In terms of tax avoidance concerns, the Director General of Inland Revenue has the power to disregard transactions that he or she believes have the effect of directly or indirectly avoiding the incidence of tax.55 In Malaysia, this provision has not been invoked to directly challenge the validity of a trust, either against the settlor or the trust body. However, the Malaysian courts56 have followed the jurisprudence of other Commonwealth jurisdictions in distinguishing between tax avoidance and tax mitigation to hold that taxpayers have the freedom to structure transactions to their best tax advantage. Accordingly, provided that the statutory and common law obligations are complied with, the achievement of tax benefits through the use of trusts by private clients should be regarded as legitimate.

As discussed above, the courts maintain a supervisory jurisdiction over the trusts and beneficiaries may exercise their rights against the trustees including, among others, the right to inspect trust documents and accounts. The courts can also appoint new trustees where it is expedient to do so, and among others, where previous trustees have to be substituted by virtue of their imprisonment or bankruptcy. The courts will, however, only assist those who go to them with 'clean hands' and will not, for instance, enforce a trust arrangement entered into for illegal purposes such as for the purpose of circumventing state restrictions on land ownership.57

V OUTLOOK and conclusionS

Wealth structuring and succession planning may not seem like the highest of priorities in a period where all but a few fortuitous industries are experiencing the impact of the economic slowdown brought about by the global covid-19 pandemic. However, proper wealth and estate management remains as critical as ever in times of economic stagnation as in times of economic prosperity. Among the tax reforms and proposals that have been discussed in the public forum is the possible reintroduction of wealth and inheritance tax.58 HNW individuals should consider whether they have adequate wealth management structures in place to ensure that they would not be unduly affected by such reforms, and also review existing structures on an on-going basis to ensure that they remain tax efficient. Further, as the economic outlook remains bleak at least in the short term, trustees should also ensure that their choice of investments remains in line with their duties under the Trustees Act 1949.59


Footnotes

1 SM Shanmugam and Jason Tan Jia Xin are partners, Ivy Ling Yieng Ping is a senior associate, and Chris Toh Pei Roo and Shona Anne Thomas are associates at Lee Hishammuddin Allen & Gledhill.

2 See New Straits Times (16 June 2020): www.nst.com.my/business/2020/06/601093/how-covid-19-
pandemic-created-2-new-malaysian-billionaires#:~:text=Kossan%20Rubber's%20Lim%20Kuang%20Sia,a%20new%20billionaire%20this%20year.

3 Section 7(1) of the Income Tax Act 1967.

4 Section 3 of the Income Tax Act 1967.

5 Paragraph 28, Schedule 6 of the Income Tax Act 1967.

6 Paragraph 28, Schedule 6 of the Income Tax Act 1967.

7 Paragraph 1A, Schedule 1 of the Income Tax Act 1967.

8 Paragraph 1, Schedule 1 of the Income Tax Act 1967.

9 Section 13(2)(a) of the Income Tax Act 1967.

10 Section 2(1) of the Income Tax Act 1967.

11 Section 13(1) of the Income Tax Act 1967.

12 Section 55 of the Income Tax Act 1967.

13 Section 86(1) of the Income Tax Act 1967.

14 Stamp Duty (Remission) (No. 2) Order 2019 (PU (A) 369).

15 Stamp Duty (Exemption) (No. 10) Order 2007 (PU (A) 420).

16 Paragraph 12, Schedule 2 of the Real Property Gains Tax Act 1976.

17 See New Straits Times Report (13 October 2019): www.nst.com.my/opinion/letters/2019/10/529351/impose-wealthinheritance-taxes.

18 Section 4(e) and 64(3)(b) of the Income Tax Act 1967.

19 Paragraph 3(1)(a), Schedule 2 of the Real Property Gains Tax Act 1976.

20 Section 132 of the Income Tax Act 1967.

22 Malaysia's Commitment in International Tax Standard (11 January 2019) Official Portal of Ministry of Finance: www.treasury.gov.my/index.php/en/tax/malaysia-s-commitment-in-international-tax-standard.html.

23 The IRB Common Reporting Standard List of Reportable Jurisdictions.

24 Section 3 of the Civil Law Act 1956 (Revised 1972).

25 Section 2 (2) of the Wills Act 1959.

26 For Muslims, this is subject to conditions imposed by Shariah law.

27 The key requirements are testator must: (i) be at least 18 years of age, (ii) be of sound mind, (iii) have the Will in writing, and (iv) sign the Will before two witnesses who are not the beneficiaries of the estate.

28 The exception to this rule is where the Will expressly contains a 'contemplation of marriage' clause.

29 According to former Natural Resources and Environment Deputy Minister, Datuk Hamim Samuri, in a news report in The Star four years ago (3 Feb 2016), as of February 2016, estates of the deceased worth RM 60 billion have not been claimed by their heirs since the country's independence. Please see: www.thestar.com.my/metro/community/2016/02/03/estates-worth-rm60bil-left-unclaimed/.

30 Section 2 of the Distribution Act 1958.

31 Section 4 of the Distribution Act 1958.

32 Section 6 of the Distribution Act 1958 and also Yap Kee Par v. Molly Yap & Ors [1996] 4 MLJ 219, (HC).

33 Article 121 (1A) of the Federal Constitution of Malaysia.

34 This is clearly provided in the Surah An-Nisa of the Quran and the 'hadith'.

35 In Shaik Abdul Latiff v. Elias Bux (1915), Edmonds JC held: 'Under the law of Islam, a testator has the power to dispose by will of not more than one-third of the property belonging to him at the time of death (see Syed Ameer Ali's Minhaj et Talibin (3rd Ed) Vol 1 at p 525 and Howard's Minhaj et Talibin at p 260.) The residue of such property must descend in fixed portions to those whom Mohammedan Law declares to be his heirs unless the heirs consent to a deviation from this rule.'

36 In cases where the application for grant of probate or letters of administration is non-contentious in nature and all papers are in order.

37 Section 3 of the Inheritance (Family Provisions) Act 1971.

38 Distribution (Amendment) Act 1997.

39 Section 6 of the Distribution (Amendment) Act 1997.

40 Section 52 of the Probate and Administration Act 1959 (Revised 1972).

41 Regulation (EU) No. 650/2012 of the European Parliament and of the Council of 4 July 2012 creates a European certificate of succession recognised by its participating member states (Denmark and Ireland do not participate in the regulation).

42 World Economic Forum (April 2019) Globalization 4.0: Shaping a New Global Architecture in the Age of the Fourth Industrial Revolution.

43 Trustee Act 1949 (Revised 1978); e.g. as to the limitation of the number of trustees.

44 See, e.g., Schmidt v. Rosewood Trust Ltd [2003] 2 AC 709. English common law is applicable in Malaysia by virtue of Section 3 of the Civil Law Act 1956.

45 Section 61(1)(a) of the Income Tax Act 1967.

46 Section 61(3) of the Income Tax Act 1967.

47 ibid.

48 Paragraph 2(c), Schedule 1 of the Income Tax Act 1967.

49 Section 7(2) of the Labuan Trusts Act 1996.

50 Section 7(5) of the Labuan Trusts Act 1996.

51 Tax is imposed at the rate of 3 per cent for Labuan trading activity and non-chargeable in respect of non-trading activity.

52 Section 35 of the Labuan Trusts Act 1996.

53 Part IVA of the Labuan Trusts Act 1996.

54 Section 25 of the Labuan Foundations Act 2010.

55 Section 140 of the Income Tax Act 1967.

56 See Sabah Berjaya Sdn Bhd v. Ketua Pengarah Jabatan Hasil Dalam Negeri [1999] 3 CLJ 587; Ensco Gerudi (M) Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri (unreported).

57 Malayan Banking Berhad v. Neway Development Sdn Bhd & Ors [2017] 9 CLJ 401.

59 Section 6 of the Trustees Act 1949.