Malaysia’s Forest City SFZ Offers Zero Tax On SFOs

Malaysian second Finance Minister Datuk Seri Amir Hamzah Azizan on Friday said that the government will offer zero tax on family wealth offices which were planning to set up their offices in the $100 billion Forest City Special Financial Zone (SFZ) in Johor state.

The Forest City SFZ presents untapped potential as an ideal business support location and will be the first location in Malaysia to offer the incentive to family wealth offices to turn the zone into a global hub for international investments in the country, according to media reports.

Speaking at the launch of the incentive package for investors in Forest City SFZ, the Finance Minister also said that among the other incentives include a concessionary corporate tax rate between 0% to 5%, and a special individual income tax rate of 15% for knowledge workers and Malaysians, who choose to work there.

Amir Hamzah further said that the establishment of family offices will broaden the investor base to channel private capital into high-growth, high-value sectors.

“These incentives are expected to attract businesses, financial institutions, and high-net-worth individuals, further augmenting Forest City’s position as a preferred investment destination,” he said.

Amir Hamzah also said the single-family office scheme, coordinated by the Securities Commission Malaysia, was aimed to attract regional and Malaysian families to manage their family wealth from the country.

According to him, there were an estimated 8,030 single-family offices globally at present and it is projected to grow by 75% to more than 10,720 by 2030. The Assets Under Management (AUM) of the family offices are expected to grow from $3.1 trillion today to $5.4 trillion by 2030, the Minister said.

He said that this was highly complementary of the Malaysian Finance Ministry’s GEAR-uP initiative where the collective strength of government linked-investment companies (GLICs) is harnessed to catalyse economic growth through domestic investments.

“Hence, as we open our doors to welcome family offices, we are also inviting them into the good company of potential partners in the form of our GLICs and other institutional funds, and to partake in high-growth, high-value investments through venture capital and private equity opportunities,” he said.

Incentives for Financial Institutions

Amir Hamzah also added that Malaysia’s banking institutions, insurance, capital market intermediaries and other eligible financial sector entities will also enjoy incentives that include special deductions on relocation costs, enhanced industrial building allowances and withholding of tax exemptions, the media reports said.

He said with the support of country’s central bank – Bank Negara Malaysia – locally incorporated foreign banks will enjoy regulatory flexibilities to open additional branches within the Forest City SFZ, and also benefit from foreign exchange flexibilities for offshore borrowing in foreign currency and investment in foreign currency assets.

Amir Hamzah said Forest City SFZ has the potential to drive growth from Johor into the rest of the ASEAN region through robust participation by local and international stakeholders. It also has the potential to mature into a globally recognised financial hub, the likes of Shenzhen in China and Dubai International Financial Centre in the UAE, he added.

Malaysian Prime Minister Datuk Seri Anwar Ibrahim announced the establishment of SFZ in Forest City and incentives to boost Johor’s economic activities and surrounding areas in August last year.