Malaysia’s Forest City Special Financial Zone: New Family Office Incentive Scheme

8 min read|Last Updated: November 7, 2024|

The establishment of the Forest City Special Financial Zone in Malaysia marks a significant milestone in the country’s financial landscape, especially with the introduction of the New Family Office Incentive Scheme. Furthermore, this initiative aims to attract domestic and international family offices, offering them a conducive environment to manage their wealth from Malaysia. Moreover, by leveraging Malaysia’s strategic location and financial ecosystem, the Forest City Special Financial Zone is set to become a hub for wealth management. This article will explore the key features, tax benefits, and advantages of setting up a family office in this promising location.

What is the New Family Office Incentive Scheme in Malaysia?

Overview of the Family Office Incentive Scheme

The New Family Office Incentive Scheme is a strategic initiative launched by the Malaysian government to encourage the establishment of family offices in the country. Family offices are private wealth management advisory firms that cater to ultra-high-net-worth individuals and families, offering services such as investment management, estate planning, and tax advisory. This scheme positions Malaysia, particularly through the Forest City Special Financial Zone, as an attractive destination for family offices to manage their wealth.

The scheme is set to take effect on 20 September 2024, allowing wealthy families to optimize their financial portfolios while benefiting from Malaysia’s favorable business environment.

Key Features of the New Family Office Incentive Scheme

The New Family Office Incentive Scheme offers several appealing features to attract potential family offices:

Tax Benefits

Exciting changes are on the horizon for those looking to invest in Malaysia! As the first location in Malaysia to offer an incredible single-family office vehicle, this city is set to become a hub for regional and Malaysian families seeking lucrative opportunities. Moreover, by the first quarter of 2025, eligible investors can incorporate a holding company incorporated in Malaysia and operate a registered office, all while enjoying a concessionary tax rate on income. The finance minister has announced that those who seek pre-registration with the SC will benefit from a concessionary corporate tax rate of just 15% under the Capital Markets and Services Act, positioning Malaysia as a prime destination for wealth management.

Additionally, with a minimum investment threshold of RM30 million and a focus on at least 10 eligible and promoted investments, the SFO scheme is designed to attract family offices and enhance Malaysia’s investor landscape. This scheme positions Malaysia to enhance its appeal, providing the perfect conditions for families looking to optimize their investment strategies. The eligibility for the tax incentives ensures that the benefits are accessible, making this an incredible opportunity for investment professionals and forward-thinking families alike. Get ready to embrace the future of investment in Malaysia!

Flexible Investment Strategies

The scheme provides family offices with flexibility in investment strategies, enabling them to explore diverse asset classes without the constraints typically imposed by traditional financial structures.

In recent developments, the single family office scheme announced in Malaysia provides family offices with unprecedented flexibility in investment strategies. This initiative positions Malaysia to enhance its investor appeal by allowing family offices to explore diverse asset classes without the constraints typically imposed by traditional financial structures. Under this scheme, families can enjoy a concessionary tax rate on income, which significantly reduces the overall tax burden.

The scheme specifically targets families incorporated in Malaysia and seeking pre-registration, thereby facilitating their eligibility for the tax incentives. Notably, the city will be the first in Malaysia to offer a 0 percent concessionary corporate tax rate alongside a favorable income tax rate of 15 percent. This strategic move aims to attract family offices and enhance the eligibility of the tax incentive scheme, fostering a robust investment environment.

Regulatory Support

Family offices will receive support from the Securities Commission Malaysia (SC) to streamline their operations and ensure regulatory compliance.

Benefits for Family Offices in Malaysia

Tax and Business Advantages

The New Family Office Incentive Scheme offers several compelling benefits for family offices:

  1. Attractive Tax Rates: Family offices benefit from a highly competitive 0% tax rate for the initial five years, with favorable tax rates continuing afterward.
  2. Strategic Location: Malaysia’s Southeast Asian location and its well-developed financial infrastructure make it an attractive destination for family offices.
  3. Legal and Regulatory Framework: With oversight by the Securities Commission Malaysia, family offices are assured of operating within a robust and transparent legal framework.
  4. Conducive Environment: The Forest City Special Financial Zone offers modern infrastructure, state-of-the-art amenities, and a vibrant community of financial experts, making it a prime location for family offices to collaborate and thrive.

Tax Incentives for Family Offices in Malaysia’s Forest City

Understanding the Tax Rate for Family Offices

One of the most attractive aspects of the New Family Office Incentive Scheme is the favorable tax rate for family offices operating within the Forest City Special Financial Zone. For entities incorporated in Malaysia, the tax rate on income generated can be 0% for the first five years, followed by a competitive concessionary tax rate.

This scheme makes Malaysia a tax-efficient jurisdiction, especially for single family offices (SFOs), enabling them to retain more wealth for reinvestment or distribution.

Conditions for Eligibility for Tax Incentives

To qualify for the tax incentives, family offices must meet the following conditions:

Registration with the SC: Family offices must register with the Securities Commission Malaysia and maintain a registered office in Pulau 1, a prime location within the Forest City Special Financial Zone.

Asset Under Management (AUM): Family offices are required to manage a minimum threshold of assets under management (AUM), as determined by the SC.

Compliance: Family offices must adhere to local regulations to fully leverage the tax benefits while contributing positively to the Malaysian economy.

Comparative Analysis of Tax Incentives in Other Locations

Malaysia’s Forest City Special Financial Zone offers a more competitive tax regime compared to hubs like Singapore and Hong Kong. The 0% tax rate for the first five years strengthens Malaysia’s appeal. This provides family offices with significant tax savings.

How Does the Single Family Office Incentive Scheme Work?

Defining Single Family Offices in Malaysia

A Single Family Office (SFO) manages the wealth of a single family or individual. In Malaysia, the New Family Office Incentive Scheme specifically tailors its benefits for SFOs. It offers unique tax incentives and benefits not available to multi-family offices or other investment entities.

Eligibility Conditions for Single Family Offices

To be eligible for the Single Family Office Incentive Scheme, the following conditions must be met:

Incorporation in Malaysia: The SFO must be incorporated in Malaysia. It is also required to maintain a registered office in the Forest City Special Financial Zone.

Significant AUM: The SFO must manage a substantial asset under management, as determined by the SC.

Compliance with Regulations: The SFO must adhere to relevant SC regulations, ensuring the integrity of the financial system in Malaysia.

Application Process for the Single Family Office Incentive Scheme

The application process for the Single Family Office Incentive Scheme involves:

  1. Pre-registration with SC:  Prospective family offices must pre-register with the SC. This involves submitting detailed information about their structure and investment strategy.
  2. Formal Application: Upon successful pre-registration, the family office can submit a formal application to benefit from the tax incentives.

The Advantages of the Forest City Special Financial Zone for Family Offices

Location Benefits of Forest City

The Forest City Special Financial Zone offers strategic advantages:

Modern Infrastructure: State-of-the-art facilities and proximity to major transportation hubs make it an ideal location for wealth management activities.

Networking and Collaboration: The zone fosters a vibrant community of financial professionals, promoting networking and collaboration among family offices.

Investment Opportunities in the Special Financial Zone

Family offices in Forest City can explore various investment opportunities across sectors such as:

  • Real Estate
  • Technology
  • Sustainable Development

The government’s commitment to developing Forest City into a financial hub further enhances its investment appeal.

Future Prospects for Family Offices in Forest City

Malaysia’s attraction of more international family offices drives a growing demand for tailored services and infrastructure. Hence, this trend positions the Forest City Special Financial Zone as a thriving hub for wealth management entities.

Conditions for Establishing a Family Office in Malaysia

Requirements for Setting Up a Family Office

Family offices looking to establish themselves in Malaysia must meet the following requirements:

  • Incorporation in Malaysia
  • Registration with the SC
  • Minimum AUM threshold

These conditions ensure only serious investors establish family offices, maintaining the integrity of the financial sector.

Asset Under Management Criteria

The AUM threshold ensures that family offices have enough financial resources for significant investment activities. Meeting this criterion qualifies family offices for tax incentives and demonstrates their ability to manage wealth effectively.

Compliance with SC Regulations

All family offices must comply with the Securities Commission Malaysia‘s regulations on corporate governance, investment activities, and reporting requirements. This compliance ensures the stability and transparency of the financial system in Malaysia.

How Long Will the New Family Office Incentive Scheme Last?

The New Family Office Incentive Scheme is a long-term initiative.

The 0% tax rate applies for a family office’s first five years. With no set expiration for the scheme, Malaysia signals long-term support for its family office sector.

Conclusion: A Promising Future for Family Offices in Malaysia

Malaysia’s Forest City Family Office Scheme offers ultra-high-net-worth families a tax-efficient, strategic, and well-regulated wealth management hub. With attractive tax incentives and support from the Securities Commission Malaysia, it appeals to family offices globally. More family offices are recognizing its benefits, positioning Malaysia’s financial zone to become a global wealth management hub.

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FAQs

What is the New Family Office Incentive Scheme in Malaysia?2024-10-30T14:50:22+08:00

The New Family Office Incentive Scheme is a government initiative to encourage the establishment of family offices in Malaysia. It offers tax benefits and regulatory support to ultra-high-net-worth individuals and families, allowing them to manage their wealth from Malaysia’s Forest City Special Financial Zone.

What are the main benefits of setting up a family office in the Forest City Special Financial Zone?2024-10-30T14:49:56+08:00

Family offices in the Forest City Special Financial Zone enjoy:

  • A 0% tax rate for the first five years.
  • A concessionary corporate tax rate of 15%.
  • A modern infrastructure conducive to wealth management activities.
  • Regulatory support from the Securities Commission Malaysia (SC).
What types of tax benefits are available under this scheme?2024-10-30T14:49:32+08:00

Family offices can benefit from a 0% tax rate on income generated for the first five years. Afterward, they can enjoy a concessionary tax rate, making it highly tax-efficient for single-family offices (SFOs) managing wealth in Malaysia.

Who is eligible for the New Family Office Incentive Scheme?2024-10-30T14:49:04+08:00

To qualify, family offices must:

  • Be incorporated in Malaysia.
  • Maintain a registered office in the Forest City Special Financial Zone.
  • Manage a minimum threshold of assets under management (AUM), as determined by the Securities Commission Malaysia.
What is the minimum investment required to qualify for tax incentives?2024-10-30T14:48:36+08:00

The minimum investment threshold is RM30 million, which must focus on at least 10 eligible and promoted investments to benefit from the tax incentives.

What is a Single Family Office (SFO)?2024-10-30T14:48:11+08:00

A Single Family Office (SFO) is a private wealth management structure dedicated to managing the financial affairs of a single ultra-high-net-worth family. This scheme caters specifically to SFOs, offering them tailored tax benefits and operational flexibility.

What are the requirements for setting up a family office in Malaysia?2024-10-30T14:47:34+08:00

To set up a family office, it must be:

  • Incorporated in Malaysia.
  • Registered with the Securities Commission Malaysia (SC).
  • Managing a significant AUM.
How does the application process for the Family Office Incentive Scheme work?2024-10-30T14:46:46+08:00

The application process includes:

  1. Pre-registration with the SC, where family offices must submit their structure and investment strategy details.
  2. Formal application submission to benefit from the tax incentives after pre-registration is approved.
What sectors can family offices invest in under this scheme?2024-10-30T14:46:04+08:00

Family offices can explore diverse sectors, including real estate, technology, and sustainable development, leveraging Malaysia’s growing economy and investment opportunities.

How does Malaysia compare to other financial hubs like Singapore and Hong Kong?2024-10-30T14:45:18+08:00

Malaysia’s Forest City Special Financial Zone offers more competitive tax incentives, such as a 0% tax rate for the first five years. This positions it as a viable alternative for family offices looking for tax-efficient wealth management solutions.

What kind of regulatory support do family offices receive?2024-10-30T14:44:31+08:00

Family offices are supported by the Securities Commission Malaysia (SC), which ensures regulatory compliance and offers guidance on corporate governance and investment activities.

How does this scheme benefit Malaysia’s economy?2024-10-30T14:43:40+08:00

By attracting family offices, the scheme aims to boost investments in Malaysia, enhance the country’s financial landscape, and create job opportunities, contributing to overall economic growth.

What is the future outlook for family offices in Malaysia?2024-10-30T14:41:24+08:00

As Malaysia continues to strengthen its financial infrastructure and offer competitive incentives, the Forest City Special Financial Zone is poised to become a key player in global wealth management, attracting more family offices in the coming years.

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