Forest City Special Financial Zone

 

Introduction

The Malaysian government launched the Forest City Special Financial Zone (SFZ) on Friday, 20th September 2024. Forest City, a duty-free island within a special financial zone, presents a unique proposition as a catalyst for economic development in the southern region of Malaysia, anchored on innovative financial services. The Government has announced an attractive list of incentives designed to make Forest City a magnet for international capital.¹  

 

The key incentives offered by the Malaysian government include: –

1. 0% tax rate for family wealth officesForest City is poised to become the first location in Malaysia to offer a 0% tax rate for family offices, fostering local private wealth management for high-net-worth families. This aligns with the Single-Family Office Scheme coordinated by the Securities Commission Malaysia, with eyes set on operation by Q1 of 2025. The establishment of family offices will broaden the investor base to channel private capital into high-growth, high-value sectors.

 

2. Concessionary offer of the corporate tax rate from 0-5%The attractive corporate tax rate from 0 and 5% puts forth the SFZ as a conducive space for the expansion of the financial footprint of global business services, financial technology and financial system operators alike.

 

3. Special individual income tax rate of 15%The competitive income tax rate for Malaysians who choose to work in the SFZ and knowledge workers alike, along with multiple entry visas, is set to grow Malaysia’s international talent pool while also providing incentives for the retention of local talent. This, in turn, aims to lend a hand in the sustainable growth of Forest City and Malaysia’s economy as a whole.

 

4. Special incentives for local banking institutions and other financial sector entitiesSpecial deductions on relocation costs, enhanced industrial building allowances and withholding of tax exemptions will be rolled out for banking institutions, insurance, capital market intermediaries and other eligible financial sector entities to further enhance the growth of Malaysia’s corporate finance landscape.

 

5. Flexible regulatory and foreign exchange arrangements for locally incorporated foreign banksLocally incorporated foreign banks will be given more leeway to open additional branches within the SFZ and leverage off the foreign exchange flexibility for offshore borrowing in foreign currency and investment in foreign currency assets, with the support of Bank Negara Malaysia.

 

Conclusion

The Malaysian government has fortified the Forest City SFZ with a basket of attractive incentives designed to catalyse the birth of a new financial and economic hub in the region, which is believed to bring substantial benefits to the Rakyat, generate high-value jobs, foster economic growth, and enhance Malaysia’s standing on the global stage.

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^[1] Keynote Address at Forest City Special Financial Zone Tax Incentive Announcement Ceremony (Securities Commission Malaysia, 20 September 2024), https://www.sc.com.my/resources/speeches/keynote-address-at-forest-city-special-financial-zone-tax-incentive-announcement-ceremony accessed on 20 September 2024.