Malaysia Issues Incentives for Forest City Financial Zone

Discover the incentives offered in the Malaysia Forest City Financial Zone, designed to attract global businesses and talent.

Malaysia has issued fiscal and non-fiscal incentives for the newly founded Forest City Financial Zone (FCSFZ).

Forest City refers to a section of the larger Forest City development project, which is a massive smart city initiative located in Johor, Malaysia, near the Singapore border. Forest City is designed to be a futuristic urban development incorporating advanced technology, green spaces, and sustainable infrastructure. It is intended to attract international businesses, investors, and residents, with a focus on environmental sustainability.

The financial zone within Forest City aims to become a global financial and business hub. It seeks to attract multinational corporations, financial institutions, and high-tech companies by offering a conducive business environment, tax incentives, and proximity to key markets in Southeast Asia, especially Singapore.

The SFZ in Forest City was first announced by Prime Minister Anwar Ibrahim on August 25, 2023.

What incentives are available in the FCSFZ?

Tax exemptions for family offices

Forest City will be the first location in Malaysia to offer a zero percent tax rate for family offices established under the Single-Family Office Scheme coordinated by the Securities Commission Malaysia. This scheme is aimed at being operational by the first quarter of 2025.

The government hopes this will attract high-net-worth families into the country and thus broaden Malaysia’s investor base.

Low corporate tax rate

The FCSFZ will implement a corporate income tax rate of between zero and five percent, particularly for businesses engaging in financial technology and global business services.

Special individual income tax rate for skilled workers

Skilled professionals can pay a reduced income tax rate of 15 percent. The government hopes this will attract an international talent pool to the FCSFZ while retaining local talent.

Investors and skilled workers will also be afforded multiple entry visas.

Incentives for local banking institutions and financial sector entities

Banking entities and financial institutions operating in the FCSFZ will enjoy incentives such as deductions for relocation costs, withholding tax exemptions, and industrial building allowances.  

Flexible regulatory and forex arrangements for incorporated foreign banks

Locally incorporated foreign banks will be granted greater flexibility to open additional branches within the SFZ and take advantage of foreign exchange flexibility for offshore borrowing and investment in foreign currency assets, backed by Bank Negara Malaysia.

Strategic positioning: Leveraging the Singapore-Johor Baru special economic zone

The development of the FCSFZ also comes as Malaysia and Singapore are preparing to launch the Singapore-Johor Baru Special Economic Zone (SEZ). Located near Forest City, the SEZ is expected to facilitate seamless trade, promote job creation, and foster collaboration between Singapore’s financial powerhouse and Johor’s rapidly growing business landscape.

The FCSFZ’s strategic proximity to the SEZ positions it well to capitalize on these cross-border synergies. The FCSFZ business can benefit from Malaysia’s competitive tax incentives and lower operating costs while maintaining close access to Singapore’s global markets and advanced financial services infrastructure.

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