MALAYSIA: Asset manager Wise PE has seen the zero tax regime in the Malaysia's Labuan International Business and Financial Centre (IBFC) for investment holding entities attract a growing number of high net-worth individuals (HNWIs) and family offices to park their legacy wealth on this island hub to avoid high inheritance taxes.
While the main clientele group hail from Japan, Taiwan and South Korea – where native inheritance taxes would be waived with proof shown that an asset was held unchanged for at least eight to 10 years – Wise PE Managing Director Christopher Won told IFN Investor this tax advantage is also being applied for Shariah compliant wealth by rich Indonesian and other Southeast Asian HNWIs.
“Wise PE now has over US$500 million in AuM for such Labuan holdings, with around US$100 million being classified as Islamic assets.”
The bulk of this AuM total is investments in either standard or customized portfolios within distinct trust entities held on behalf of clients. This facilitates the tax advantage as Labuan IBFC recognizes investment entities can "hold" assets located in other jurisdictions, Christopher said.
These portfolio investments are mainly in food and beverage firms, AI plus ESG-related enterprises and also various commercial and residential real estate holdings within Malaysia and Indonesia, where advantages include long-term investments getting some exemption from capital gain taxes - which can erode asset valuations.
Christopher said a lot of the firm’s clients are more concerned about preserving asset values – especially those from Northeast Asia, where they are subjected to high inheritance taxes – rather than being focused on optimizing return on investments.
“These clients would sign for our standard portfolio, with investments starting from US$250,000. They are content to let that wealth be left untouched till it is time to be passed on to the next generation.”
On the other hand, Christopher said Islamic clients want the invested capital to generate some form of benefit, which includes generating some return that can be either donated or reinvested. For such customization, which includes Shariah certification, the minimum portfolio investment is set at US$10 million.
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