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The Labuan International Waqf Foundation (LIWF) is a unique Islamic wealth management tool, providing a structure that allows individuals and organizations to establish a Waqf (endowment) under the legal framework of a foundation. This innovative structure, governed by Shariah principles, is offered by Labuan IBFC, one of the few jurisdictions globally that supports both conventional and Islamic wealth management solutions.
Historically, Waqf has been a powerful mechanism for social and economic development within Islamic communities, providing long-term support for charitable causes such as education, healthcare, and welfare. The Labuan International Waqf Foundation (LIWF) modernizes this concept by offering flexibility for both charitable and family-oriented purposes, making it a versatile tool for wealth preservation and social responsibility.
Key Features of LIWF
LIWF can be established for different types of Waqf
Shariah-Compliant: LIWF operates strictly according to Shariah principles. All its activities, including the holding and management of Waqf assets, must adhere to these guidelines, which ensure the proper use and management of endowed assets for charitable or designated purposes.
Legal Structure: The LIWF adopts the legal framework of a foundation under the Labuan Foundations Act 2010, providing legal certainty to founders (Waqif). This enables proper control, governance, and management of the Waqf, ensuring that the founder’s wishes are upheld over time.
Flexibility: LIWF allows for various types of Waqf structures, such as:
Charitable Waqf (Waqf Khayri): Endowments solely for charitable causes.
Family Waqf (Waqf Ahli): Endowments for the benefit of family members with charitable purposes when family members are no longer alive.
Self-dedicated Waqf (Waqf ‘ala Nafs): Where the founder retains income during their lifetime with the proceeds directed to charitable causes after their passing.
Joint Waqf (Waqf Mushtarak): Combining charitable and family purposes.
Asset Protection: Once assets are endowed into the LIWF, they are protected from claims, inheritance, or ownership disputes, ensuring their preservation for the stated purposes.
Confidentiality: The foundation provides a high degree of privacy. Beneficiaries and asset information are not disclosed publicly, making it an ideal choice for those seeking discretion in wealth management.
The Structure of LIWF
Why Set Up a Labuan International Waqf Foundation?
Why Set Up a Labuan International Waqf Foundation?
Long-Term Wealth Preservation: The LIWF structure ensures that assets are protected and managed for the long term, providing continuous support to both family members and charitable causes.
Control and Flexibility: Founders retain control over how the Waqf is structured, ensuring their wishes are respected. They can also modify the foundation’s charter to adapt to evolving needs.
Legal Certainty: The governance and management of the Waqf assets are protected under the Labuan Foundations Act 2010, with strict adherence to Shariah principles.
Tax Efficiency: The income derived from non-trading activities within the foundation is not taxable under Labuan's Business Activity Tax Act 1990, making it a tax-efficient vehicle for managing family wealth.
Setting Up a Labuan International Waqf Foundation
Setting Up a Labuan International Waqf Foundation
Establishing a LIWF is a streamlined process governed by the Labuan Financial Services Authority (Labuan FSA). The founder appoints a Labuan trust company as the foundation’s secretary, responsible for submitting the necessary documentation and ensuring compliance with regulatory requirements.
Key steps include:
Drafting the Foundation Charter (Waqfiyyah): This document outlines the founder’s intentions, including how assets will be managed, who the beneficiaries are, and the role of the Shariah adviser.
Appointment of a Shariah Adviser: The Shariah adviser ensures that all activities of the foundation comply with Islamic principles.
Endowment of Assets: Assets are endowed into the foundation through the Waqf, and the LIWF acts as the trustee (Nazir or Mutawalli).
Frequently Asked Questions (FAQs)
Frequently Asked Questions (FAQs)
What is Waqf and why is it important?
Waqf is the dedication of property for religious, charitable, or pious purposes under Shariah law. It is a key mechanism in Islamic wealth management, ensuring the sustainable flow of benefits to specific beneficiaries.
Who can set up a LIWF?
Both Muslims and non-Muslims can establish a LIWF, as long as the objectives do not contravene Shariah principles.
Can a LIWF be dissolved?
Yes, a LIWF can be dissolved under the terms outlined in the foundation’s charter, typically when its purpose has been fulfilled or under exceptional circumstances approved by the Shariah adviser.
Are the proceeds from the LIWF taxable?
Distributions to beneficiaries are tax-exempt, but income derived from Malaysian property may be subject to Malaysia’s Income Tax Act 1967.
Conclusion
Conclusion
The Labuan International Waqf Foundation (LIWF) offers a modern, Shariah-compliant solution for individuals and families looking to manage and preserve their wealth across generations while fulfilling charitable obligations. With its flexible structure, legal protection, and tax efficiency, the LIWF provides an ideal platform for Islamic wealth management and philanthropy.
Contact DingerCo today to learn how you can set up a Labuan International Waqf Foundation tailored to your specific wealth management needs.
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