Chambers – EIR
February 10, 2025Chambers – Trade Marks and Copyright 2025
February 19, 2025An Overview of the Single Family Office Scheme in Malaysia
Introduction
The Securities Commission Malaysia (“SC“) is expected to release detailed guidance on the Single Family Office Scheme (“SFO scheme“) by the first quarter of 2025. As we await these developments, we examine the key details disclosed so far.
On 20 September 2024, the Minister of Finance II unveiled the SFO scheme, designating Forest City Special Financial Zone (“FCSFZ“) as Malaysia’s first location to offer a 0% tax rate for family offices. Aligning with the global family office trend, this initiative aims to attract both foreign and Malaysian families to establish their wealth management operations in Malaysia.
SC Chairman Dato’ Mohammad Faiz Azmi emphasised that the SFO scheme is projected to generate an economic multiplier effect of RM3.9 billion to RM10.7 billion, driving the creation of skilled jobs and boosting demand for ancillary services.
A Single Family Office (“SFO”) is a corporate vehicle, wholly owned or controlled by members of a single wealthy family, established to exclusively manage the family’s assets, investments, and long-term interests. A SFO may also serve multiple generations and branches of the family.
A Single Family Office Vehicle (“SFOV”) is a corporate vehicle wholly owned or controlled by members of a single family, created solely to hold and safeguard the family’s assets, investments, and long-term interests.
A “single family” refers to individuals who are direct lineal descendants of a single ancestor, including their close relatives.
An illustration of the relationship between a SFO and a SFOV is provided in the table below:[1]
Tax Incentives for SFOV
Eligible SFOVs may qualify for a 0% concessionary tax rate on income generated from approved investments for a period of 10 years (“initial period”), with the possibility of a 10-year extension (“additional period”), subject to meeting the relevant requirements.
Requirements
Initial Period
To qualify for the tax incentive during the initial 10-year period, a SFOV must meet the following conditions:
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Establish itself as a newly incorporated investment holding company in Malaysia and obtain pre-registration with the SC to confirm its eligibility for tax incentives;
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Operate from Pulau 1, FCSFZ;
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Maintain a minimum Assets Under Management (“AUM”) of RM30 million and allocate at least 10% of AUM or RM10 million (whichever is lower) to eligible and promoted local investments;
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Incur a minimum annual operating expenditure (“OPEX”) of RM500,000 locally; and
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Employ at least two full-time employees, each earning a minimum monthly salary of RM10,000, with at least one employee being an investment professional.
Additional Period
To qualify for the tax incentive during the additional 10-year period, the SFOV must meet enhanced substance and financial requirements, including:
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Increase AUM to a minimum of RM50 million and allocate at least 10% of AUM or RM10 million (whichever is higher) to eligible and promoted local investments;
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Raise annual OPEX by at least 30% compared to the Initial Period, reaching a minimum of RM650,000 locally; and
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Employ at least four full-time employees.
Licensing
Generally, a company that manages assets, including capital market instruments, is required to obtain a fund management license under the Capital Markets and Services Act 2007 (“CMSA”). However, a SFO may qualify for an exemption from licensing requirements if it can demonstrate that its management services are exclusively provided for the benefit of a SFOV that is its related corporation.
In A Nutshell
Family offices are a relatively new concept in Malaysia, yet the country is rapidly positioning itself as an appealing alternative to Singapore or Hong Kong, Asia’s premier hub with over 2,000 SFOs.[1] Malaysia’s lower AUM threshold of RM30 million (approximately USD 6.7 million), compared to Singapore’s SGD20 million (approximately USD 14.8 million or RM66 million), offers a more accessible and competitive entry point, making it an attractive choice not only to the ultra-wealthy but also for high-net-worth individuals.[2]
To-date, several key aspects of the SFO scheme have yet to be clarified, including the scope of eligible investments that qualify for the tax incentive, the detailed criteria for investment professionals, and the potential rollout of exclusive visas for wealthy families and their employees. These crucial details are expected to be clarified through the forthcoming guidance and relevant tax exemption order by the end of Quarter 1, 2025.