SC outlines conditions for family offices' tax break in Forest City special financial zone

• SC said that it is currently working with the relevant stakeholders to operationalise the scheme by the first quarter of 2025.

KUALA LUMPUR (Sept 23): The Securities Commission Malaysia (SC) has outlined several conditions for single family office vehicles (SFOVs) to be eligible for the recently announced 0% concessionary tax rate, including assets under management (AUM) of at least RM30 million.

The SFOV must also meet minimum local investment in eligible and promoted investments of at least 10% of its total AUM or RM10 million, whichever is lower, the SC said in a statement on Monday.

This comes after the government announced last Friday incentives to jumpstart the Forest City special financial zone, which include special corporate income tax rates and the 0% tax rate for family offices.

In the statement, SC said that it is currently working with the relevant stakeholders to operationalise the scheme by the first quarter of 2025.

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, and an additional 10 years with further conditions, the SC said.

To qualify for the initial 10-year period, the SFOV must be a new investment holding company incorporated in Malaysia and seek pre-registration with the SC for its eligibility for the tax incentives, it added.

Besides that, the SFOV must spend operating expenditure (opex) locally at a minimum of RM500,000 annually, and employ a minimum of two full-time employees of whom at least one is an investment professional, with a minimum monthly salary of RM10,000.

To qualify for the additional 10-year period, the SFOV must then hold an AUM of at least RM50 million and an annual opex of RM650,000.

"The SFO or management company may not need to get certain licences 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," the SC said.

SC chairman Datuk Mohammad Faiz Azmi said the projected economic multiplier of the initiative from the local substance requirements is estimated to be RM3.9 billion to RM10.7 billion.

This, he said, also includes positive effects of the creation of skilled employment and demand for other ancillary services

"Establishing the SFO scheme positions Malaysia to enhance its investor base by attracting regional and Malaysian families to manage their wealth from Malaysia," Mohammad Faiz said.

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