On 20 September 2024, Malaysia announced a groundbreaking development in the world of wealth management—the establishment of its first Family Wealth Office in the Forest City Special Financial Zone. This move is set to position Malaysia as a leading hub for ultra-high-net-worth individuals (UHNWIs) and families looking for a competitive and comprehensive wealth management solution in Asia.
Special Incentives in the Forest City Special Financial Zone
The Forest City Special Financial Zone offers a host of incentives designed to attract global businesses and affluent families:
– Corporate Tax Incentives: Businesses operating in the zone can enjoy a preferential corporate tax rate ranging from 0% to 5%.
– Knowledge Workers’ Income Tax: Knowledge workers employed in the zone benefit from a reduced personal income tax rate of 15%.
– Family Offices: Perhaps the most enticing offer is the 0% tax rate for establishing and operating family offices within the zone.
– Fintech and Foreign Payments: Companies in the fintech sector providing foreign payment services will enjoy a reduced tax rate of 5%.
– Shared Services Industry: Additional incentives are available for companies involved in shared services, particularly in insurance.
– Digital Payment Hub: The zone is envisioned as a hub for digital payment solutions, further enhancing its attractiveness to global players.
– Banking and Insurance: Banking and insurance companies are offered incentives such as support for relocation costs, building allowances, and exemptions from withholding tax.
– Branch Establishment: Simplified procedures for opening branches, accompanied by regulatory benefits, make the zone an ideal location for expansion
Understanding Family Offices: What They Are and What They Do
A family office is a private wealth management advisory firm that caters to the financial needs of ultra-high-net-worth individuals or families. These offices provide a comprehensive solution to managing wealth, offering services that go beyond traditional investment management.
Key Functions of a Family Office:
– Investment Management: Family offices manage investments by handling asset allocation, portfolio management, and risk management to ensure the family’s wealth grows and is preserved over time.
– Wealth Transfer: They assist in planning for the seamless transfer of wealth across generations, including estate planning and the establishment of trusts.
– Tax Planning: These offices structure investments and income to minimize tax liabilities, a critical service for maintaining and growing wealth.
– Philanthropy: Family offices also manage charitable giving and philanthropic activities, helping families to make a positive impact on society.
– Lifestyle Management: Beyond financial services, family offices often provide personal services such as managing household staff, arranging travel, and offering concierge services.
– 0% Tax rate for up-to 20 years
– Minimum Assets Under Management (AUM) of RM 30million with Domestic investment of RM 10million or 10% of AUM whichever is lower.
Comparing Malaysia’s Family Offices with Hong Kong and Singapore
Let us before comparing the Hong Kong and Singapore of Family Office, hereby brief the setup, benefit, and advantages for the both countries.
Hong Kong: A Gateway to China and Beyond
Setup:
Hong Kong has long been a preferred destination for family offices due to its strategic location as a gateway to Mainland China and other Asian markets. The city offers a straightforward process for setting up a family office, with access to a wide range of professional services, including legal, tax advisory, and wealth management.
Benefits and Advantages:
– Favorable Tax Regime: Hong Kong operates under a territorial tax system, meaning that only income derived from Hong Kong is taxed. This offers significant advantages for global families with diverse income sources.
– Strong Legal Framework: The city’s robust legal system, based on English common law, provides a high degree of certainty and protection for family wealth.
– Financial Hub: Hong Kong is a leading global financial center, offering a deep pool of financial products and services. This includes access to top-tier banks, investment firms, and other financial institutions.
– Proximity to China: The city’s close ties with Mainland China make it an attractive base for families looking to invest or manage assets in the region.
Singapore: The Wealth Management Hub of Southeast Asia
Setup:
Singapore is often regarded as the go-to location for family offices in Southeast Asia. The city-state has developed a comprehensive ecosystem for wealth management, supported by government policies that encourage the establishment of family offices. The Monetary Authority of Singapore (MAS) has set up specific frameworks to facilitate the creation and operation of family offices.
Benefits and Advantages:
– Attractive Tax Incentives: Singapore offers various tax exemptions for family offices, particularly under the Enhanced Tier Fund Scheme (Section 13X of the Income Tax Act), which exempts qualifying funds from tax on specified income.
– Political Stability: Singapore’s political and economic stability makes it a safe and predictable environment for wealth preservation and growth.
– World-Class Infrastructure: The city boasts world-class infrastructure, including financial, legal, and professional services that are tailored to meet the needs of UHNWIs.
– Education and Quality of Life: Singapore is renowned for its high quality of life, excellent education system, and safe environment, making it an ideal location for families.
Comparing Malaysia’s Family Offices with Hong Kong and Singapore
With a clear understanding of how Hong Kong and Singapore have positioned themselves as leading hubs for family offices, let’s explore how Malaysia’s new offering stacks up against these well-established competitors.
This section adds depth to your blog by detailing the setup process, benefits, and advantages of family offices in Hong Kong and Singapore, providing a solid foundation for the subsequent comparison with Malaysia.
Hong Kong:
– Regulatory Environment: Known for its favorable regulatory environment and strong legal system.
– Tax Incentives: Hong Kong offers competitive tax incentives, though they are not as aggressive as Malaysia’s new offerings.
– Professional Services: The availability of skilled professionals in private wealth management adds to Hong Kong’s appeal.
Singapore:
– Regulatory Environment: Singapore boasts a highly favorable regulatory environment with a robust legal framework.
– Tax Incentives: It offers attractive tax incentives, including exemptions on certain types of income.
– Professional Services: Singapore is renowned for its strong presence of professional services firms skilled in wealth management.
Malaysia’s Competitive Edge:
Malaysia’s 0% tax rate for family offices in the Forest City Special Financial Zone sets it apart from both Hong Kong and Singapore. Coupled with its strategic location within the Asia-Pacific region, multicultural environment, and potential cost advantages, Malaysia is emerging as a strong contender in the family office space.
Why Malaysia? The Attractions and Benefits for Taxpayers
Malaysia offers several attractions and benefits for those considering establishing their family office in the Forest City Special Financial Zone:
– Strategic Location: Malaysia’s location provides excellent connectivity to major Asian markets, making it an ideal base for regional operations.
– Multicultural Environment: The diverse cultural setting in Malaysia appeals to global families seeking a rich and inclusive environment.
– Cost Advantages: The potential for lower operational costs compared to Hong Kong and Singapore adds to Malaysia’s appeal.
– Specific Tax Benefits: The zero percent tax rate for family offices is a significant draw, making Malaysia an attractive destination for wealth management.
Benefits for Taxpayers:
– Reduced Tax Burden: Businesses and knowledge workers can take advantage of the lower tax rates, easing their overall tax burden.
– Economic Growth: The influx of investment and economic activity in the region is expected to drive growth.
– Job Creation: The development of this financial hub will lead to the creation of skilled employment opportunities.
– Enhanced Services: The establishment of the Family Wealth Office is likely to improve the financial and professional services infrastructure in Malaysia.
Conclusion:
In conclusion, Malaysia’s strategic move to establish its first Family Wealth Office in the Forest City Special Financial Zone marks a significant step towards positioning the country as a premier destination for wealth management in Asia. With an attractive 0% tax rate for family offices, coupled with preferential tax rates for businesses and knowledge workers, Malaysia is poised to compete with established hubs like Hong Kong and Singapore. While Hong Kong offers proximity to China and a strong legal framework, and Singapore boasts political stability and comprehensive tax incentives, Malaysia brings a fresh perspective with its unique combination of cost advantages, strategic location, and a multicultural environment. These factors, along with the comprehensive incentives offered by the Forest City Special Financial Zone, make Malaysia an increasingly appealing option for ultra-high-net-worth families seeking to manage and grow their wealth. As the region continues to evolve, Malaysia’s proactive approach in catering to the needs of global families and businesses signals its intent to become a key player in the competitive landscape of international wealth management. Whether it can fully rival Hong Kong and Singapore remains to be seen, but the groundwork laid by this initiative certainly sets the stage for Malaysia to carve out its niche in the global family office ecosystem.
Kim Heng is an accounting and taxation professional whose sterling reputation has drawn countless clients to the NKH Group. When the GST was first introduced, he was commissioned to give 100+ talks on GST implementation as well as over 20++ talks on E- Invoice implementation by multiple businesses and industry associations, showing the depth of their confidence in his expertise. In the following years, Kim Heng would go on to share his knowledge on (among others) branding, tax planning, and fundraising at 20+ seminars organised by business associates that were widely attended by the public. He has over 20 years of experience consulting and advisory on taxation, corporate structure planning, business valuer, company secretarial administration, constitution advisory, and etc.
