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| LOFSA Publishes Exposure Draft On Shariah Compliant Trusts |
by Lorys Charalambous, for LawAndTax-News.com
Tuesday, February 05, 2008
The Labuan Offshore Financial Services Authority (LOFSA) has issued an Exposure
Draft to provide guidance on the requirements to be observed by all offshore trusts
created under the Labuan Offshore Trusts Act 1966 (LOTA) and managed under the
Shariah principles, it emerged last week.
The Exposure Draft aims to ensure that Shariah compliant offshore trusts created
in the Labuan IBFC are based on necessary requirements under LOTA and Shariah
principles.
It also aims to provide some clarification for Shariah compliant trusts, as
currently there is no legislation on Islamic financial business.
The Guidelines are issued pursuant to Section 4(5) of the Labuan Offshore Financial
Services Authority Act 1996, and set out additional requirements to be observed
by all offshore trusts created and recognised under Section 7 (1) of Labuan
Offshore Trusts Act 1966 (LOTA) that are created and managed under Shariah principles.
The Guidelines aim to ensure that Shariah compliant offshore trusts created
in Labuan IBFC are created and managed based on prudent practices and necessary
requirements under the Shariah principles at all times.
The term “Shariah” refers to the guidance and code of conduct derived
from the Koran, and embodies all aspects of the Islamic faith, including beliefs
and practices that formed the sources of Islamic jurisprudence.
A Shariah compliant offshore trust is defined in the guidance as follows :
"(An) Offshore trust has the same meaning assigned to it by subsection
7(1) of LOTA. 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 setllor to exercise his rights in creating a
trust in accordance with the Shariah principles."
"In Labuan IBFC, the creation of a Shariah compliant trust can be initiated
under LOTA and the creation of the trust shall be as per Section 8 of LOTA."
"The trust may include several types of offshore trusts recognised under
LOTA including but not limited to discretionary trusts, fixed interest trusts,
charitable trusts, life insurance trusts, trading trusts and testamentary trusts
or any other forms of offshore trusts set out under provisions of LOTA that
are in compliance with Shariah principles."
The full text of the LOFSA exposure draft can be found in the Tax-News
Resources section.
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