Introduction to FCSFZ
The Forest City Special Financial Zone (FCSFZ) is Malaysia’s first special financial zone, strategically located on Pulau Satu in the Forest City development. Announced by the Malaysian Government in August 2023, this initiative aims to position Malaysia as a global hub for financial services, foreign investment, and high-value business activities.
FCSFZ offers a range of incentives designed to attract multinational corporations, financial institutions, and wealthy families, making it a unique destination for capital growth and wealth management.
The zone has been granted duty-free status through a series of legislative amendments, and it benefits from tailored tax incentives for businesses and individuals alike.
Key Incentives at FCSFZ
As part of the government’s effort to stimulate international investment, the Finance Minister II announced a comprehensive package of incentives on 20 September 2024 for companies and individuals operating within the FCSFZ. These incentives, which cater to a wide range of industries and business models, include:
- 0% corporate tax rate for Family Offices under the Single-Family Office (SFO) Scheme for up to 20 years.
- Corporate tax rates between 0% and 5% for eligible businesses operating in the FCSFZ.
- A 15% flat income tax rate for knowledge workers and Malaysians employed in the zone.
- 5% tax rate for global business services, financial technology, and foreign payment system operators.
- Special tax incentives for banking institutions, insurance companies, and capital market intermediaries, including:
- Deductions on relocation costs.
- Enhanced industrial building allowances.
- Withholding tax exemptions.
- Bank Negara Malaysia will offer regulatory flexibilities to foreign banks operating within the zone. These include:
- Permission to open additional branches within the FCSFZ.
- Foreign exchange flexibilities, allowing foreign banks to borrow and invest in foreign currencies more freely.
The Single-Family Office (SFO) Scheme
One of the most notable incentives is the Single-Family Office (SFO) Scheme, designed to attract wealthy families seeking to manage their investments efficiently in a tax-free environment. This scheme, coordinated by the Securities Commission Malaysia (SC), provides an opportunity for families to centralise their wealth management in Pulau Satu.
Under the SFO Scheme:
- Two wholly-owned entities must be established:
- A Single-Family Office (SFO) to manage the family's investments and perform administrative tasks.
- A Single-Family Office Vehicle (SFOV) to hold and manage the family's assets.
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