The Securities Commission Malaysia (SC) has on Monday outlined the conditions for the new family office incentive scheme announced by Malaysian government recently that is aimed at enhancing investment landscape in Malaysia.
SC said in a statement the incentive provides for a 0 percent concessionary tax rate on income generated by eligible investments from the single family office vehicle (SFOV).
The Forest City will be the first location in Malaysia to offer a 0 percent tax rate incentive for family offices.
The incentives offered are subjected to several conditions. They include the SFOVs must establish and operate a registered office in Pulau 1, Forest City Special Financial Zone.
Besides, the incentives will be available for 20 years, divided into an initial 10-year period followed by another 10 years.
To qualify for initial period (ten years), the SFOV must be a new investment holding company incorporated in Malaysia and seek pre-registration with the SC on the eligibility of the tax incentives.
Meanwhile, the management company, which is a related company of SFOV, will be set up and operate out of Pulau 1, Forest City Special Financial Zone with at least one investment professional with minimum monthly salary of MYR 10,000 ($2,379).
The SFOV must hold asset under management (AUM) of at least MYR 30 million ($7.14 million) and meet minimum local investment in eligible and promoted investments of at least 10 percent of AUM or MYR 10 million ($2.38 million) whichever is lower.
The SFOV will also need to spend operating expenditure (OPEX) locally a minimum of MYR 500,000 ($118,962) annually.
It will also need to employ a minimum of two full-time employees of whom at least one is an investment professional, with minimum monthly salary of MYR 10,000 ($2,379).
To qualify for additional period (additional ten years), the SFOV must hold AUM of at least MYR 50 million ($11.9 million) and meet minimum local investment in eligible and promoted investments of at least 10 percent of AUM or MYR 10 million ($2.38 million) whichever is higher.
The SFOV will need to spend operating expense (OPEX) locally (30 percent higher than initial period) – a minimum of MYR 650,000 ($154,651) annually and employ a minimum of four full-time employees.
According to the statement, the SFO or management company may not need to get certain licenses 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 is currently working with the relevant stakeholders to operationalize the scheme by the first quarter of 2025.
The SC Chairman Mohammad Faiz Azmi said that this move taps on the rising trend of Family Offices globally, providing comprehensive wealth management solutions, while leveraging on Malaysia’s robust regulatory environment.
According to him, establishing the SFO scheme positions Malaysia to enhance its investor base by attracting regional and Malaysian families to manage their wealth from Malaysia.
“The projected economic multiplier of this initiative from the local substance requirements is estimated to range from MYR 3.9 billion ($930,000) to MYR 10.7 billion ($2.55 billion), which also includes the positive effects on creation of skilled employment and the demand for other ancillary services,” he added.
This scheme comes after Malaysian Prime Minister Anwar Ibrahim’s announcement last year on policies to encourage establishment of family offices in Malaysia to draw a larger pool of investors that will widen the financing support for small and medium-sized enterprises (SMEs) and the new economy.
The country’s Minister of Finance II Amir Hamzah Azizan announced the single family office scheme as part of incentive packages for the Forest City Special Financial Zone on last Friday.
The SC has been tasked with coordinating the single family office incentive scheme.
Eligible SFOVs may apply to the SC for certification for purposes of the tax incentives, subject to the SFOVs demonstrating that it has complied with the relevant conditions.
Forest City to be the first location in Malaysia to offer a 0 percent tax rate for family offices