ISKANDAR PUTERI — Forest City will be the first location in Malaysia to offer a zero tax rate for family offices, Finance Minister II Datuk Seri Amir Hamzah Azizan said.
He said the incentive was among a competitive package to attract international capital to Forest City, which is now a special financial zone (SFZ).
Other incentives include a concessionary corporate tax rate of between zero and 5%, and a special 15% individual income tax rate for knowledge workers and Malaysians working there.
On family offices, he said the single-family office scheme, coordinated by the Securities Commission Malaysia, aims to attract regional and Malaysian families to manage their family wealth from Malaysia.
“Supported by good infrastructure, a competitive talent pool, robust common law practices and effective governance, opportunities abound for family offices,” he said at the Forest City SFZ tax incentives announcement here today.
The scheme is expected to be operational by the first quarter of 2025, he added.
Amir Hamzah said to be eligible for the incentives, family offices, among others, need to have an asset size of over RM30 million with half of the investment made in Malaysia. It must also hire local employees.
He said family offices would enjoy the incentives for a decade on fulfilling the needed requirements with an option for an extension if they scale up their assets and workforce.
The minister said globally, there are an estimated 8,030 single-family offices and the number is projected to grow by 75 per cent to more than 10,720 by 2030.
“Total estimated assets under management of family offices are expected to rise to US$5.4 trillion by 2030 from US$3.1 trillion currently.
“The establishment of family offices, therefore, will surely broaden the investor base to channel private capital into high-growth, high-value sectors,” he said.
Amir Hamzah said other than family offices, the government envisions Forest City as a hub for global financial business services, for financial technology or fintech, and la ocation for foreign payment system operations with a special 5% tax rate provision.
He said Malaysia’s shared services industry charted impressive growth with over 800 global business service centres registered under Malaysia Digital (MD).
“Global business service centres established in the financial zone will drive cost reductions and improve productivity for the financial sector through process standardisation and digital adoption,” he said.
He said fintech companies are important for Malaysia’s future economic development and Forest City aims to create an environment conducive to fintech growth, focusing on areas such as regulatory technology (RegTech) and insurtech.
“By fostering collaboration, innovation and investment, the zone supports the broader national objective of transforming Malaysia into a hub for cutting-edge financial services,” he said.
He also said the SFZ would further enhance banking sector growth by fostering innovative solutions and facilitating seamless cross-border transactions.
“To this end, we are pleased to announce that 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 tax exemptions.
“Not least, with the support of Bank Negara Malaysia, locally incorporated foreign banks will enjoy regulatory flexibilities to open additional branches within the SFZ. They will also benefit from foreign exchange flexibilities for offshore borrowing in foreign currency and investment in foreign currency assets,” he said.
The Regent of Johor Tunku Ismail officiated the event attended by Johor Menteri Besar Datuk Onn Hafiz Ghazi. – September 20, 2024