What is the difference between forming a charitable trust under a living trust compared to forming a foundation under the Trustee Act 1952?

The senior General Manager from Rockwills, Mr. Azhar Iskandar Hew explained in this video.

Living Trust is pretty simple to set up because you do not need to get the approval of the authorities when you want to set up the trust. It’s a private arrangement you have with the trustee.

So, you draw up the papers and all that, then tell the trustee what you want to put inside this trust fund. So, the question is now: When do you want to activate this trust fund, upon death or during your lifetime?

Now, if you go with the Trustee Incorporation Act, in order to start up the trust fund, you will have to apply for licensing with the Prime Minister’s Department. You will need to provide whatever documentation they require which is usually the trust deed, application forms. The PM department also requires you to submit plans regarding what you want to do with the foundation in the future, your plans for the next twelve months if, let’s say, the license has been granted.

Keep in mind though, those plans that the PM’s department requires should be detailed, else they would think that you’re not serious about it. Though they don’t require guarantees in terms of how much you want to put in, they do ask for a proper plan. The Inland Revenue Board also will ask for a proper plan for them to grant the tax exemption license.

Now, what will happen is, you will apply to the PM’s Department to get approval first for all the paperwork. Once that is approved, it will probably take about six to eight months, sometimes even to a year.

Your next step will be after getting the approval from the PM’s Department, you will apply to Inland Revenue Board for a tax exemption license. That takes six to eight months.

Now, during this application, they will ask you: “From the time you got the PM’s Department license to your application today, what have you done in terms of the money that you are putting in to the foundation?” They want to see activities that have been done while you are waiting for approval from the IRB for the tax exemption.

That’s one reason. They want to look at your history, and at the same time, what they will tell you are you need to provide a plan for the next twelve months. If we grant you the license today, for the next twelve months, what are your detailed plans to use the funds?

They are pretty tight on that because they want to make sure that the approvals given are not going to be misused or used for money laundering purposes.

Also, when you have a center or foundation, it means you are really serious and into it. You need to spend time managing that foundation and treating it as if it is a company that you are involved in full time.

You can’t wash your hands off because you are the founder of that foundation. You will need to monitor the foundation’s activities because if anything is found wrong with the annual report, the PM’s Department and Inland Revenue will look for the founder and for the board of trustees in that foundation.

So, a foundation is for people who are serious in wanting to do charitable work. If you want a name only trust, I suggest you do a charitable trust, because that’s less cumbersome in terms of compliance.

Another difference is that a foundation can raise funds from the public but trusts cannot do that. Unless there are people who would willingly put money in to the trust. Somebody donates money in to your charitable trust, that’s fine, but you can’t have fund raising activities like Karaoko Singing contests… You can’t do all that. Your trust still has to be very much self-funded or on donations.

For Premium Webinar Members, you can watch the full replay of the session on How to Setup a Charity Foundation here:
charityfoundation


KCLau
KCLau

Personal finance author and trainer

    22 replies to "How to Set Up a Charity Foundation in Malaysia"

    • Kitt

      Hi KC,

      If I just need to setup a crowd funding website mainly to collect donations from public and consolidate the donations to the beneficiary, do I need to register for a foundation for this or just non-profit organization will do?

      Many thanks,
      Kitt

      • KCLau

        Hi Kitt, after consulting Ahzar Hew (Senior GM from Rockwills), here is his answer:
        Azhar: it would be illegal to collect donations from the public. Approval from the Welfare Department or the setting up of a foundation or NGO (possibly) is needed. At the same time, tax exemption licence is to be obtained from IRB for donations received.

    • wilfred juot kulungan

      I just want to ask, how can I open my charity foundation in malaysia? what should I prepare if I want to open my charity foundation in malaysia. please advise. contact number: 01123123718

    • Grace Ngu

      we are in planning to set up and charity foundation in Malaysia, our foundation main objective is to ‘growing together with the children in backward countries’, mainly emphasize in educations, as we have consensus that educations is the door for the children to step forward to touch and connect with worldwide.Our first Target country will be the Laos, will start with build a school there to let children have the opportunity to study.

      Appreciate you if able to guide/advise me on how to start my first step – register a charity foundation in Malaysia, and any documents should be prepare or any terms and qualifications to open it.

      My contact: +6016-7337882

    • Rajesh N Balakrishnan

      Hai… may son die from AML Leukimea on November 2015 because we can’t fine a donor for him… I would like open a foundation under his name… ‘ Hope Thru Randy’ to find more donor for our sabahan patients. .. we have the likas hospital supporting us in our cause… pls help guide us in building this foundation… help us, so we can help them in needs…tks

    • Rajesh N Balakrishnan

      Pls contact us Rajesh at 0128337269… ‘Hope Thru Randy’…

      • KCLau

        Hi Rajesh,

        You can contact Rockwills. They have legal team who are experts in setting up charity foundations.

    • Sue

      Hi ,

      Me and my partner ,looking to set up a charity group.
      Was tried to find many way to do but it seems difficult for us.
      please advise if you can help me to set up the company for charity foundation? If yes ,please contact me @ 0122531322 Sue.

      I look forward to a favorable response from you.

      Regards
      Sue

    • JULIA - LIM

      thank you.
      very informative.
      i’m still in the ‘slower cooker’.
      once ready will contact your office.

    • Stephen

      Hello,

      I am an Australian citizen living in Sydney and would like to setup a charity in Malaysia.

      I am wondering if Malaysian government allows foreigners to register a charity organisation in Malaysia.

      Thanks,
      Stephen

    • Stanley Tan

      Mr Lau, please advise how can i start up a company or NGO in Malaysia to provide a place for teachers and students to learn about Google classroom and others tech skills. My mission is to provide computers for students to learn the power to connect skill in the future. I visited Malaysia so many times, i seen not every kids have the computer skill to learn.

    • Jenny Howard

      Stephen, Iam in the same situation as you and would like to make contact with you so can you in box me on FB or Whats app me on +61423217322.

    • chan choong tak

      I try to establish a charitable foundation to assist the administration of a proposed trust school.
      Please advise on the procedure . Thank you.

      Comment: your article is helpful.

    • Mian Naveed

      How i can register NGO in malaysia.i am from pakistan and a rafugee

    • Farid

      Hi KC,
      I want set-up an organization to raise funds from Only Corporations and (later) donations from individuals raised through online auction. The mission is to improve sanitation and clean water for poor people in rural areas in Malaysia and eventually within SEA region. Which of the 3 options above (LivingTrust/Foundation Inc 1952/Foundation Companies Act 1965) would work best for my cause?

    • Tris

      I would like to setup a platform and mobile app to help the NGOs to do fund raising more effectively and provide more visibility to the donors on the collected amount and activities going on.. do i need to register as Foundation or Trust?

    • Dr Hakim

      want to set up a Foundation & a Trust

      Please get back to me
      01129078007

    • Kim

      Need your advice about taking over a dormant foundation

    • Azizan Mohd Noor

      Hi Mr Lau.i have a charitable foundation already registered with PM dept.i want to do a supplementary trust deed to the original registered trust deed.do i need to submit to PM dept first before stamping or stamp it after approval by PM dept. My board of trustees has approved and signed it.By the way what is the contact number in PM dept.thank you.

      • KCLau

        Hi Azizan, so sorry that I don’t have the resource to assist you on this matter. It is out of my scope of expertise.

    • Tg Ahmad Faisal Tg Ahmad Badrullah

      how do i setup my own ngo?

    • Alex Chan

      Good day KCLau, how can I open my charity foundation in malaysia? what documents should I prepare if I want to open my company charity foundation and NGO in malaysia. please advise. contact number: 0146441918

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