Malaysia’s Special Financial Zone: A New 0% Tax Option for Family Offices
Malaysia has taken a bold step to attract global private capital with the launch of its Single Family Office (SFO) incentive scheme in the Forest City Special Financial Zone (FCSFZ). Announced in late 2024 and now effective in 2025, the scheme offers eligible family offices up to 20 years of 0% income tax—a landmark development for Southeast Asia’s wealth management landscape.
A New Framework for Family Offices
To qualify, a family office must establish two entities:
- a Single Family Office Vehicle (SFOV), which holds and manages the family’s assets; and
- a Single Family Office Management Company (SFO MC), which carries out the investment and governance functions.
Both entities must be newly incorporated in Malaysia and maintain a physical presence in Forest City for at least half of the year. This anchors the structure within the zone and ensures operational substance.
Incentives and Conditions
The scheme grants an initial 10 years of tax exemption, with the possibility of another 10 years if enhanced conditions are met. These include maintaining minimum assets under management, local spending, and a workforce presence.
Baseline requirements are relatively modest compared to other jurisdictions:
- AUM of RM 30 million (about USD 7 million) to start, rising to RM 50 million later
- At least 10% of AUM, or RM 10 million, invested in Malaysian sectors
- Annual operating expenses of RM 500,000 in the first phase, rising to RM 650,000
- Two full-time staff initially, increasing to four after the extension
The scheme also provides one-off exemptions, such as relief from stamp duty and capital gains tax on asset transfers into the SFOV—making setup more cost-efficient.
Regional Significance
This is Malaysia’s first targeted family office regime, and it arrives at a time when Singapore and Hong Kong are tightening oversight while continuing to compete for global capital. Forest City’s lower thresholds, long-term tax holiday, and commitment to substance standards position it as a complementary option for families seeking diversification within Asia.
The requirement to reinvest part of the portfolio locally is a clear sign of Malaysia’s intention: to tie family office growth to domestic economic development. For investors comfortable with this approach, the reward is full tax neutrality for up to two decades.
The opportunity is significant, but the rules are technical. Families need to ensure that their vehicle and management company are properly structured, that investment thresholds are met, and that governance is documented from the outset. At Bolster Group, we guide clients through this process—coordinating incorporation, reviewing AUM requirements, and aligning operational spending with eligibility tests—so that the benefits of the Forest City scheme can be secured without unnecessary risk.
Malaysia’s new family office regime in Forest City is one of the most generous tax incentives in the region, but also one of the most demanding in terms of compliance and substance. For families considering an Asian base alongside Singapore or Hong Kong, it offers a unique mix of accessibility and long-term certainty. With the right structuring, it could become a cornerstone of regional wealth planning.
Bolster Group is ready to help you assess whether Malaysia should form part of your strategy.