The Malaysian government has introduced a series of tax incentives to accelerate the development of Forest City as a key financial hub. Located in Johor, this 1,400-hectare private development has struggled to meet its ambitious growth targets since its inception, but these new incentives aim to position Forest City as a global financial and economic hub.
Special Corporate Tax Rates and Personal Income Tax Incentives
To attract businesses and high-net-worth individuals, the government is offering a concessionary corporate tax rate ranging from 0% to 5% for companies setting up in Forest City. Additionally, knowledge workers and Malaysians choosing to work in this special financial zone will benefit from a personal income tax rate of 15%, according to 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 explained.
Family Office Incentives: A First for Malaysia
One of the standout features of the incentive package is the introduction of a 0% tax rate for family offices. This marks the first time Malaysia has introduced such a tax structure, targeting wealthy families from Asia and beyond to manage their assets in Malaysia. The government expects the scheme to be operational by the first quarter of 2025.
“Supported by good infrastructure, a competitive talent pool, robust common law practices, and effective governance, opportunities abound for family offices,” Amir added.
Malaysia is aiming to capture a share of the growing family office market. Globally, there are currently around 8,030 single-family offices, and this number is projected to grow by 75% by 2030, managing assets worth an estimated US$5.4 trillion (RM22.6 trillion).
Positioning Forest City as a Financial Services Hub
In addition to the family office incentives, the government is positioning Forest City to become a hub for global business services, financial technology, and foreign payment system operators. To encourage the establishment of these businesses, a special 5% tax rate will apply to these entities.
Financial institutions, including banks, insurance companies, and capital market intermediaries, will also benefit from additional incentives, such as special deductions on relocation costs, enhanced industrial building allowances, and withholding tax exemptions. Furthermore, locally incorporated foreign banks operating in the special financial zone will enjoy the flexibility to open additional branches and benefit from foreign exchange flexibilities for offshore borrowing and foreign currency asset investments.
Reviving Forest City
Forest City has long been viewed as a high-potential project, but it has faced challenges in achieving its target growth. Initially planned to house up to 700,000 residents, the project currently accommodates only a fraction of that number. The designation of Forest City as a special financial zone in August 2023, by Prime Minister Datuk Seri Anwar Ibrahim, was seen as a strategic move to breathe new life into the development.
The new tax incentives are expected to draw a wide range of international businesses, financial institutions, and high-net-worth individuals, thereby boosting the region’s economic profile.
Conclusion
With the newly announced tax incentives, Forest City is set to transform into a financial and economic hub, attracting global capital and high-net-worth families. The combination of concessionary corporate tax rates, a 0% tax rate for family offices, and other financial sector incentives will make Forest City a highly competitive destination for international investments. The government is banking on these incentives to propel Forest City forward and make it a key player in the global financial landscape by 2030.
