Set Up a Trust in Malaysia

In order to set up a trust in Malaysia, founders must observe the Trustee Act 1949 and trust law (the Trust Companies Act 1949 applies to trust companies acting as trustees). The settlor is the one who creates the trust, and he/she can be either an individual or a corporation in Malaysia. This article presents information about this legal arrangement, the conditions that need to be complied with. Assistance in setting up trusts can be provided by one of our lawyers in Malaysia, who can help you set up a trust in Malaysia.

What to consider when setting up a trust in Malaysia

Opening a trust in Malaysia starts with establishing purposes. For example, if you want estate planning or maybe just asset protection, this information should be found in the trust deed, alongside specific objectives and the names of beneficiaries. Here are some other details to consider when opening a trust in Malaysia:

• choosing a specialist, such as our Malaysian lawyer, can help you set up a trust;
• drafting the trust deed is the next step in registering this legal arrangement in Malaysia. This should include detailed information about the assets included;
• a trust must have a settlor and a trustee or agent in charge of the management of such estate planning tool;
• the distribution of assets of a trust in Malaysia will be carried out in accordance with the instructions provided by the settlor.

With the help of fiduciary services in Malaysia, persons and legal entities can easily establish trusts. These legal arrangements are managed with caution and in the best interest of the beneficiaries. If you are interested in such services, you can opt for our attorneys in Malaysia.

Types of trusts available in Malaysia

Trusts in Malaysia must serve one of the approved purposes: family, investment, insurance, charitable, special, etc. Trust companies acting as trustees must meet conditions such as the following:

• can be established with a minimum authorized capital;
• part of the said capital has been paid up in good faith;
• the company has a duly appointed Board of Directors and is able to meet its obligations.

Trusts can be set up for various purposes, as stated above. Our lawyers in Malaysia present some of the common types of trusts that can be set up by investors:

• Discretionary trust: this is a type of trust that allows the trustee a large degree of rights and the ability to exercise his powers according to his own judgment; the beneficiaries do not have legal rights in these cases and the settlor is the one who offers guidance to the trustee when needed or through a special document that states his intentions for the management of the trust.
• Fixed interest trust: unlike in the previous case, here the trustee does not have unlimited powers over how the assets are distributed to the beneficiaries, in some cases, investors can set up a combination of fixed interest and discretionary powers to match the manner in which the fund assets are distributed.
• Maintenance trust: this can also be named an accumulation trust, and it is discretionary only in part; for example, it can be discretionary until the beneficiary (most often a child) reaches a certain age or finishes his academic education; from that point onward, the trust is a fixed interest one.
• Purpose trust: this is a type of trust that has no beneficiaries but is used for charitable purposes.
• Reserved powers trust: as the name suggests, the settlor may award the trustee reserved or special powers, in this case, for example, for the investment of trust assets or to appoint or remove beneficiaries.

One of our attorneys in Malaysia can help you make the submission of trust deeds with the Registrar.

Understanding revocable and irrevocable trusts

Revocable trusts are often popular options because the management terms and asset information can be modified throughout life. As for irrevocable trusts, once established, they cannot be modified, and assets can only be distributed after the death of the settlor and according to his/her instructions.

Taxation of trusts in Malaysia

Trusts in Malaysia are subject to taxation on the income derived from the country. The tax year is the same as in the case of a limited liability company. The trust body is treated as a separate entity for tax purposes. Its income is assessed separately from the personal income tax charged to the beneficiaries of that trust. The standard corporate income tax rate for a trust in Malaysia is 24%, irrespective of whether or not it is a non-resident trust. In the case of non-resident trusts, withholding tax applies to the income derived by the trust. We highlight the fact that this can apply only in some cases and for some types of income, the provisions of the double tax treaties signed by Malaysia may be relevant.

Short conclusion about trusts in Malaysia

Trusts in Malaysia can be established for different purposes. While some people opt for family or charitable trusts, others prefer investment trusts. Any of these legal arrangements is subject to certain rules and responsibilities, as well as implications. Working with a specialist in the field is essential to know exactly what opening a trust in Malaysia entails.

Statistics about trusts in Malaysia

Here are some statistics about trusts in Malaysia:

• Unit trusts in Malaysia are among the most popular. Around RM 546 billion was the total net asset value of such trusts in 2024.
• In the same year, there were already around 775 unit trusts established in Malaysia.

Both Malaysians and foreigners can choose our services for opening trusts. Moreover, those interested in immigration to Malaysia can also work with us. We also provide the services of our commercial lawyer in Malaysia. We, therefore, invite you to find out more by contacting our law firm in Malaysia.