Tax incentives for the Forest City Special Financial Zone

Tax incentives for the Forest City Special Financial Zone

On 20 September 2024, the Honorable Finance Minister II launched the Forest City Special Financial Zone (SFZ) and announced a list of tax incentives that will be available in the SFZ. Forest City includes four man-made islands with a duty-free status in Iskandar Puteri, Johor. The creation of the SFZ was first announced by the Honorable Prime Minister Datuk Seri Anwar Ibrahim, in August last year.

The incentives that were announced for the SFZ are as follows:

•       0% tax rate for the Single-Family Office Scheme, coordinated by the Securities Commission of Malaysia (SC) (more details below)

•       Special individual income tax rate of 15% for knowledge workers, including Malaysians that work in the SFZ

•       Concessionary tax rate of 5% for financial global business services, financial technology or fintech, and foreign payment system operators

•       Special deductions on relocation costs, enhanced industrial building allowances and withholding tax exemptions for banking institutions, insurance, capital market intermediaries and other eligible financial sector entities

SC’s Frequently Asked Questions for the Single-Family Office Scheme

The Forest City is set to be the first location in Malaysia to offer a 0% tax rate for Family Offices, and the SC will be responsible to coordinate the Single-Family Office Scheme. A Frequently Asked Questions (FAQs) document was issued by SC on 23 September 2024 to provide more details on the incentive.

A Single-Family Office is a corporate vehicle, wholly owned or controlled by members of a single

wealthy family, created to exclusively manage the assets, investments and long-term interests of that family. The Single-Family Office may represent multiple generations and branches of the family.

The 0% tax rate will be given to eligible Single-Family Office Vehicle for a period of 10 years (initial period) and can be extended for another 10 years (additional period), subject to the specified conditions.

Applications can be submitted to SC for certification of the tax incentive. Interested Single-Family Office Vehicles are welcome to seek pre-registration with the SC to confirm eligibility for the tax incentives.

The Single-Family Office Scheme is targeted to be operational by the first quarter of year 2025. Please refer to Appendix 1 for the FAQs..