(Bloomberg) -- Malaysia is offering 0% tax rate for family offices to set up shop in its struggling mega-project Forest City, as it looks to revive investor interest in the $100 billion development near its border with Singapore.
The government is also offering a concessionary corporate tax rate of between 0% and 5%, and individual income tax rate of 15% for knowledge workers and Malaysians working there, Malaysia’s Second Finance Minister Amir Hamzah Azizan said in Johor state on Friday.
The single-family office program “aims to attract regional and Malaysian families to manage their family wealth from Malaysia,” he said at the launch of Forest City as a Special Financial Zone. The program will be the first of its kind in Malaysia and is targeted to be operational by the first quarter of 2025, he added.
The incentives come at a time when Malaysia and Singapore are close to finalizing an agreement over a proposed Special Economic Zone to be set up in Johor. Local officials have proposed that Forest City be included in the broader economic zone.
Forest City, a project by Chinese real estate giant Country Garden Holdings Co. that counts Malaysia’s King Ibrahim Iskandar as among its investors, was built a decade ago as an eco-friendly hub comprising four artificial islands to attract 700,000 residents.
But the project has been beset by challenges, including a clampdown by China’s government on citizens seeking to purchase real estate abroad. Covid, political controversy and Country Garden’s financial woes added to the mega-city’s troubles.
Prime Minister Anwar Ibrahim announced last year that Forest City would be designated a financial zone in a bid to reignite demand in the project. A part of Forest City was also granted duty-free status by Malaysian lawmakers earlier this year.
Banking institutions, insurance and capital market intermediaries will receive special deductions on relocation costs, enhanced industrial building allowances and withholding tax exemptions, according to Amir. Locally incorporated foreign banks will be allowed regulatory flexibilities to open additional branches within the Special Financial Zone, he added.
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