Malaysia: A Guide To International Waqf Foundation

Last Updated: 14 December 2017
Article by Labuan IBFC Inc.


Labuan International Business and Financial Centre (Labuan IBFC) is Asia's only midshore jurisdiction with conventional and Islamic wealth management solutions. Capitalising on this strength, the jurisdiction has introduced the concept of "Waqf" by private foundation, with the launch of the Labuan International Waqf Foundation (LIWF).

The concept of Waqf is a key aspect of Islamic wealth management. Historically, Waqf has been used to generate revenue towards supporting a myriad of charitable purposes such as education, welfare and even the building as well as management of public hospitals.

Waqf is a functioning element of the Shariah legal system, allowing ummah from around the world to have the peace of mind that their assets are used for good deeds.

In essence, LIWF is an Islamic private foundation which holds and manages properties for identified beneficiaries based on the Shariah principles on Waqf, while it adopts the legal form of a foundation, provided by the Labuan Foundations Act 2010.

A unique feature of LIWF is its flexibility, allowing it to be utilised as an Islamic wealth management vehicle and at the same time, providing for charitable purposes, which may be extended to promote financial inclusion.

The distinct advantage of establishing a Waqf using a foundation as its legal structure, is that it offers the founder (Waqif) legal certainty, thus allowing for proper control and management of the Waqf in accordance with his wishes.

LIWF can be established for different types of Waqf:



  1. What is a Waqf and why is it important?
    "Waqf" means holding a certain property and preserving it in order to ensure that its benefits continuously flow to a specified group of beneficiaries for religious, charitable or pious purposes as recognised by the Shariah for the pleasure of Allah SWT. The properties, after being declared as Waqf, no longer remain in the ownership of the donor. The beneficiaries of a Waqf can benefit from the proceeds of the dedicated property.

    Waqf has tremendous potential to spur the economic growth and development of a nation. Historically, Waqf has been proven as one of the most effective mechanisms to support noble charitable purposes such as education, social welfare and healthcare in countries like Turkey and Egypt. Besides philanthropic considerations, Waqf can also be established for private wealth and estate management.
  2. Why would I set up a Labuan International Waqf Foundation (LIWF)?
    LIWF gives the founder (Waqif) a structure with legal certainty for the proper control and management of his Waqf in accordance with his wishes, provided it follows the Shariah principles of Waqf. LIWF gives the founder flexibility and exclusive control over how to structure and wisely manage his Waqf foundation, as well as how to distribute the benefits and preserve the assets for a long-term period.


  1. What is LIWF and how is it different from other Islamic structures?
    LIWF is an Islamic foundation, in which all its activities must be in compliance with Shariah principles. LIWF has its own unique characteristics to hold Waqf properties (i.e. the properties that are endowed into the foundation by way of Waqf) with the objective of managing the properties for identified beneficiaries based on Shariah principles of Waqf.
  2. What are the unique/ distinct advantages of LIWF?
    LIWF has a distinct dimension of adhering to its specific purposes in preserving the Waqf property, in that it cannot be sold, mortgaged, given away as a gift or inherited. Only the income or usufruct can be distributed to the beneficiaries.

    LIWF provides and honours the conditions of the founder in accordance with the Shariah principles of Waqf. When the beneficiaries are no longer in existence, the benefits of the Waqf shall be distributed to charitable purposes as agreed by the Shariah adviser of the Waqf foundation.

    Specifically, LIWF provides for legal certainty as the LIWF is established based on legal guidelines issued by the Labuan Financal Services Authority (Labuan FSA). In addition, Shariah compliance is endorsed by Labuan FSA Shariah Supervisory Council (SSC), comprised of leading Islamic scholars and practitioners.
  3. Are non-Malaysians and non-Muslims allowed to set up a LIWF and/ or benefit from it?
    Yes, provided that the objectives and activities of the Waqf foundation do not contravene with the Shariah principles of Waqf.
  4. Does Labuan IBFC offer private and public LIWF?
  5. Who are the parties eligible to endow the assets into a LIWF?
    For private LIWF, the founder, who prescribed his/her name in the charter of the LIWF is eligible to endow assets into the Waqf foundation. In the case of public LIWF that solicits donations from the public, the endowment of assets can be done either by the founder or the public.
  6. In setting up a LIWF, what would be the differentiating elements, as compared to a conventional Labuan foundation or even a Shariah-compliant foundation?
    Unlike a normal Shariah-compliant foundation where the endowment of assets by the founder into the Islamic foundation may be facilitated by way of hibah or hadiah (gift), in the case of LIWF, the endowment of the property must be executed by way of Waqf as defined by Shariah principles. This can be done by indicating the intention of establishing the waqf in the charter (Waqfiyyah). LIWF shall then act as the trustee (nazir or mutawalli) of the Waqf.

    The charter or Waqfiyyah of the LIWF shall form the basis to regulate and administer the LIWF in accordance with the Shariah principles of Waqf.


  1. Can a LIWF be dissolved? If yes, under what circumstances? And what are the procedures?
    LIWF can be dissolved in accordance with Section 67 of the Labuan Foundations Act 2010 and provisions of the charter as endorsed by the Shariah adviser. In the event where a Waqf foundation is dissolved and there remains some Waqf properties after its dissolution, the charter (Waqfiyyah) shall specify the beneficiary who is entitled to receive the remaining Waqf property. If no beneficiary has been identified, the charter (Waqfiyyah) shall specify that the remaining Waqf properties be distributed to charitable purposes as agreed by the Shariah adviser of the Waqf foundation.
  2. What are the allowances to provide for the dispute resolution of a LIWF?
    LIWF may opt to be governed by Malaysian law or foreign law. In this regard, the charter (Waqfiyyah) of LIWF shall specify the dispute resolution mechanism and governing law provisions accordingly.


  1. How does one set up a LIWF?
    LIWF can be established through registration pursuant to Section 107 of the Labuan Islamic Financial Services and Securities Act 2010. The founder shall, before the registration of a LIWF, appoint a registered Labuan trust company to be the secretary of the proposed Waqf foundation.
  2. Where can one access the guidelines and requirements for setting up a LIWF?
    The guidelines and sample Waqfiyyah on LIWF are available on Labuan IBFC's website at
  3. Who can help draw up a charter for a LIWF?
    A legal counsel and/or Shariah adviser who is well versed in Shariah principles on Waqf would be able to assist.
  4. Are the proceeds/ earnings from the endowment/ assets under the LIWF taxable? If yes, what is the taxation rate?
    Any income derived from a Malaysian property is subject to tax under Malaysia's Income Tax Act 1967. Non-Malaysian property income shall be subject to tax under the Labuan Business Activity Tax Act 1990 (LBATA). Under LBATA, all non-trading income which includes income derived from investment holding activities are not taxable. Income from trading activities are taxed at 3% on its audited net profits or RM20,000 (upon election) per annum.
  5. What is the tax implication on distributions by a LIWF in the hands of the beneficiary?
    Distributions by LIWF to its beneficiaries who may be a resident or non-resident are exempted from Malaysian tax. The non-resident beneficiaries of the foundation will need to satisfy their own tax liabilities in their respective jurisdictions of tax residence.
  6. Can a LIWF be redomiciled to other jurisdictions?
    Yes, pursuant to Section 24 of the Labuan Foundations Act 2010.
  7. What are the approvals required to endow the assets into a LIWF?
    Pursuant to Section 5(2) of the Labuan Foundations Act 2010, approval from the Labuan FSA is required for an endowment of Malaysian property. In addition, LIWF that involves Malaysian founder or Malaysian property must obtain the necessary approvals from relevant domestic authorities where applicable.
  8. Does a LIWF require the appointment of a Shariah Council? If yes, what is the minimum number of council members?
    LIWF shall appoint a qualified person as a Shariah adviser who shall advise the Waqf foundation and ensure compliance with Shariah principles, including Shariah principles on Waqf. A LIWF may also appoint a Shariah Council. For LIWF with significant amount of assets or a charitable LIWF soliciting donations from the public, the appointment of a Shariah Council with an appropriate number of members as decided by the founder is highly encouraged.
  9. Does the LIWF need to produce audited accounts?
    Yes. The accounts of the Waqf foundation shall be audited at least once a year by approved auditors.
  10. What are the types of costs incurred for setting up a LIWF?
    The costs incurred in setting up a LIWF are:

    1. Statutory fees payable to the Labuan FSA, the yearly registration fee is RM750; and
    2. Administration fees payable to a Labuan trust company.
  11. Can the LIWF charter be amended upon the death of the founder? If yes, what are the processes? Who has the authority to make the changes?
    The charter shall specify that, upon the death of the founder, no amendments are allowed to be made to the charter, beneficiaries and distribution of income/usufruct to the beneficiaries as chosen by the founder. This is to ensure that the objectives of the Waqf foundation remain intact as desired by the founder.

    If a change in the distribution of Waqf income is required after the registration of the LIWF, rates and procedures of the change must be defined in the charter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions