Forest City To Offer 0% Tax Rate For Family Offices
The government recently announced the new Family Office incentive scheme. It is aimed at enhancing the investment landscape in Malaysia.
This is after the Prime Minister’s announcement last year of policies to encourage establishment of family offices in Malaysia.
Minister of Finance II, Senator Datuk Seri Amir Hamzah Azizan announced the Single Family Office scheme last Friday. He stated that it is part of incentive packages for the Forest City Special Financial Zone (Johor).
Zero tax on family office in Forest City SFZ
This incentive will offer zero tax on family wealth offices that are established in the Forest City Special Financial Zone (SFZ) in Johor. The incentive is to draw in a larger pool of investors into Malaysia.
It aims to attract regional and Malaysian families to manage their family wealth from Malaysia. The Single-Family Office Scheme is coordinated by the Securities Commission Malaysia (SC).
Conditions to qualify for the family office incentive
The SC has also outlined the conditions that interested investors must comply.
This incentive provides for a 0% concessionary tax rate on income generated by eligible investments from the Single Family Office Vehicle (SFOV). Forest City will be the first location in Malaysia to offer a 0% tax rate incentive for Family Offices.
SFOV to qualify for initial 10-year period
In order to be eligible for the incentives, the SFOV must be established and operate a registered office in Pulau 1, Forest City, in Johor. The incentives will be effective for an initial period of 10 years. The SFOV must meet further conditions to qualify for an additional 10 years.
To qualify for the initial 10-year period, the SFOV:
- must be a new investment holding company incorporated in Malaysia
- seek pre-registration with the SC for eligibility for the tax incentives
- must hold assets under management (AUM) of at least RM30 million
- have at least 10% of AUM or RM10 million whichever is lower in local eligible investments
- must spend operating expenditure (OPEX) locally at a minimum of RM500,000 annually
- employ at least two full-time employees (at least one has to be an investment professional, with a minimum monthly salary of RM10,000)
Extra criteria have to be met to qualify for the additional 10-year period. These include:
- holding AUM of at least RM50 million, meet minimum local investment in eligible and promoted investments of at least 10% of AUM or RM10 million whichever is higher.
- spend OPEX locally (30% higher than initial period) a minimum of RM650,000 annually, whilst also employing a minimum of four full-time employees.
According to the SC. the SFO or management company may not need to get certain licenses under the Capital Markets and Services Act 2007 (CMSA), such as for fund management, as long as it only provides services for its related corporation, the SFOV.
As of now, the SC is currently working with relevant investors to get the scheme operational by the first quarter of 2025.
