KUALA LUMPUR (Sept 20): The Malaysian government on Friday announced incentives to jumpstart the Forest City special financial zone that include special corporate income tax rates and 0% tax rate for family offices.

To attract international capital to Forest City, the government is offering a concessionary corporate tax rate of between 0% and 5%, and a personal income tax rate of 15% for knowledge workers and Malaysians who choose to work there, said Finance Minister II Datuk Seri Amir Hamzah Azizan.

“These incentives are expected to attract businesses, financial institutions, and high-net-worth individuals, further augmenting Forest City’s position as a preferred investment destination,” Amir said.

Malaysia has been seeking to breathe life into Forest City, a private town sprawling 1,400 hectares in Johor largely developed by the Chinese, after taking off slower than expected. To be developed over 20 years, the project currently houses a tiny fraction of the target of 700,000 people.

In August 2023, Prime Minister Datuk Seri Anwar Ibrahim declared Forest City a special financial zone.

Forest City will also be the first location in Malaysia to offer a 0% tax rate for family offices to attract Asian and Malaysian families to manage their wealth from Malaysia, Amir said. The government is targeting to have the scheme operational by the first quarter of 2025, he added.

“Supported by good infrastructure, a competitive talent pool, robust common law practices and effective governance, opportunities abound for family offices,” he added.

Malaysia is seeking a slice of the market of estimated 8,030 single family offices globally. By 2030, the number is projected to grow by 75% to more than 10,720 offices managing assets worth some US$5.4 trillion (RM22.6 trillion).

Forest City is also envisioned to become a hub for financial global business services, financial technology, and foreign payment system operators with a special 5% tax rate, Amir said.

Banks, insurance, capital market intermediaries and other eligible financial sector entities in Forest City will also enjoy incentives that include special deductions on relocation costs, enhanced industrial building allowances and withholding tax exemptions, he said.

Locally incorporated foreign banks will also enjoy flexibilities to open additional branches within the special financial zone, and also benefit from foreign exchange flexibilities for offshore borrowing in foreign currency and investment in foreign currency assets.

“We have fortified the Forest City special financial zone with a basket of attractive incentives designed to catalyse the birth of a new financial and economic hub in the region,” he added.