The Securities Commission Malaysia (SC) has released detailed conditions for Single Family Office Vehicles (SFOVs) to qualify for the 0% concessionary tax rate, a key incentive announced to boost investment in the Forest City special financial zone. Among the essential requirements is that SFOVs must manage at least RM30 million in assets under management (AUM), with a minimum local investment of 10% of total AUM or RM10 million, whichever is lower.
Key Conditions for Eligibility
The 0% tax incentive, aimed at attracting high-net-worth families to manage their wealth from Malaysia, comes with several eligibility conditions. These include:
- Minimum AUM Requirement: SFOVs must have at least RM30 million in AUM to be eligible for the 0% tax rate.
- Local Investment: SFOVs must make a local investment in eligible and promoted sectors, comprising at least 10% of their total AUM or RM10 million, whichever is lower.
- Location and Incorporation: The SFOV must operate from a registered office located in Pulau 1, Forest City, Johor, and be incorporated as a new investment holding company in Malaysia.
- Operating Expenditure and Employment: Each SFOV is required to spend a minimum of RM500,000 annually on operating expenses, with at least two full-time employees, one of whom must be an investment professional earning a minimum salary of RM10,000 per month.
Additional 10-Year Incentive Period
The 0% tax rate is offered for an initial period of 10 years, with the possibility of an additional 10 years if certain conditions are met. For this extended period, the SFOV must increase its AUM to at least RM50 million and spend at least RM650,000 annually in local operating expenses.
Exemptions from Licensing
The SC also clarified that SFOVs or their management companies would not require certain licences under the Capital Markets and Services Act 2007 (CMSA), as long as the services provided are exclusive to related corporations.
Economic Impact of the Initiative
According to SC chairman Datuk Mohammad Faiz Azmi, the local substance requirements of this initiative are projected to generate an economic multiplier effect ranging between RM3.9 billion and RM10.7 billion. This figure includes not only direct investments but also the creation of skilled employment and the demand for ancillary services related to the family office sector.
“The establishment of the SFO scheme positions Malaysia as a competitive destination for regional and Malaysian families to manage their wealth,” Mohammad Faiz said, highlighting the potential long-term benefits of attracting high-net-worth individuals to the country.
Conclusion
The SC’s announcement outlines stringent yet attractive conditions for single-family offices, particularly in the Forest City zone. By offering a 0% tax rate and other incentives, the Malaysian government aims to create a flourishing environment for high-net-worth families and businesses, enhancing the country’s status as a global financial hub.
