The Securities Commission Malaysia (SC) has endorsed the government’s introduction of a new Family Office incentive scheme, aimed at bolstering Malaysia’s investment landscape. The scheme seeks to attract global and regional investors, helping to deepen the pool of capital available for financing small and medium-sized enterprises (SMEs) and Malaysia’s evolving new economy sectors.
This initiative follows Prime Minister Dato’ Seri Anwar Ibrahim’s policy announcement last year, designed to encourage the establishment of family offices in the country. The initiative is expected to position Malaysia as a key destination for high-net-worth families looking for robust wealth management solutions.
On September 20, 2024, Minister of Finance II, Senator Datuk Seri Amir Hamzah Azizan, unveiled the Single Family Office (SFO) incentive scheme as part of a broader set of financial incentives targeting the Forest City Special Financial Zone. The SC will be responsible for overseeing the implementation of this scheme, which offers a 0% tax rate on income generated by eligible investments from Single Family Office Vehicles (SFOVs).
Transforming Forest City into a Hub for Family Offices
Forest City, located in Johor, will become Malaysia’s first designated zone to offer a 0% tax incentive for Family Offices, marking a key milestone in the country’s financial strategy. The incentives are designed to stimulate long-term investment and are subject to specific criteria, ensuring alignment with Malaysia’s broader economic goals.
The Family Office incentives are structured across two phases:
- Initial Period (10 years):
- SFOVs must be newly incorporated in Malaysia and pre-registered with the SC.
- The related management company or SFO must operate out of Pulau 1, Forest City Special Financial Zone, employing at least one investment professional with a monthly salary of RM10,000 or more.
- The SFOV must manage assets under management (AUM) of at least RM30 million, with a minimum local investment of 10% of AUM or RM10 million, whichever is lower.
- A minimum of RM500,000 in annual local operating expenditure (OPEX) and the employment of two full-time employees, including at least one investment professional, are required.
- Additional Period (subsequent 10 years):
- AUM must increase to at least RM50 million, with a minimum local investment of 10% of AUM or RM10 million, whichever is higher.
- Local OPEX must rise to RM650,000 annually.
- The number of full-time employees must increase to four.
The incentive package underscores Malaysia’s ambition to build a sustainable financial hub, leveraging both its regulatory strength and the growing demand for family office services across Asia.
Attracting Patient Capital and Long-Term Growth
Family offices are known for their patient capital approach, typically investing in bonds, equities, and private markets with a focus on high-growth enterprises. These investments are seen as instrumental in driving long-term economic development, particularly in sectors critical to Malaysia’s growth strategy, such as technology and innovation.
SC Chairman Dato’ Mohammad Faiz Azmi highlighted that the scheme reflects a rising global trend, where family offices are becoming significant players in wealth management and investment. “Establishing the SFO scheme positions Malaysia to enhance its investor base by attracting regional and Malaysian families to manage their wealth from here,” Faiz said.
He further noted the projected economic multiplier effect of the initiative, estimating it could generate between RM3.9 billion and RM10.7 billion in economic value over the long term. This would be driven by job creation, increased demand for ancillary services, and the strengthening of the local investment ecosystem.
Operationalizing the Family Office Scheme
While the SC will oversee the scheme, it is working closely with stakeholders to ensure the incentive programme is operational by the first quarter of 2025. Eligible SFOVs can apply for certification from the SC to access tax incentives, provided they comply with all relevant conditions.
In addition, family offices or management companies associated with the SFOV may not be required to hold certain licenses under the Capital Markets and Services Act 2007 (CMSA) as long as they limit their services to related corporations.
With this new scheme, Malaysia aims to not only deepen its financial sector but also establish itself as a regional hub for family offices, aligning with the country’s broader strategy of attracting high-value investments and fostering long-term economic growth.
