On 15 February 2025, our Senior Partner, Datuk DP Naban, was on a panel discussion on “Family Office: Mega Trend Of Intergenerational Wealth Transfer” at the 10th Dealing & Governance Conference 2025 hosted by Maybank. Together with him on the panel were Bernard Yap (Partner, Tax, Ernst & Young) and Ramesh Manimekalanandan (Head, Product & Investment, Group Wealth Management, Maybank).
The panel discussion, featuring insights from tax and wealth management experts, highlighted key developments and strategic considerations for high-net-worth families looking to establish Single Family Offices (SFOs) in Malaysia. Central to the discussion were the newly introduced tax incentives under the Forest City Special Financial Zone (FCSFZ), optimal structuring of SFOs, and the corresponding investment holding entity, the Singe Family Office Vehicle (SFOV).
A. Overview Of SFOs
An SFO is a dedicated entity established by high-net-worth families to manage their wealth, investments, and estate planning. Unlike multi-family offices that serve multiple clients, and SFO is tailored exclusively to the needs of one family (individuals who are lineal descendants from a single ancestor), ensuring greater control, privacy, and customization in financial and legacy planning. The structure provided by the Securities Commission of Malaysia (SC) is extracted as follows:
Essentially, SFOVs can enjoy a 0% concessionary tax rate on income generated from eligible investments for 10 + 10 years, if the following conditions are met:
Requirements | Initial Period | Additional Period |
Incorporation & Pre-registration | SFO Established and operating in Pulau 1 of the FCSFZ
SFOV Must be a new investment holding company incorporated in Malaysia, pre-registered with the SC on tax incentive eligibility | - |
Assets Under Management (AUM) | At least RM30 million | At least RM50 million |
Local investment requirement | Minimum 10% of AUM or RM10 million (whichever is lower) | Minimum 10% of AUM or RM10 million (whichever is higher) |
Annual Operating Expenditure (OPEX) | Minimum RM500,000 locally | Minimum RM650,000 locally (30% higher than during the Initial Period) |
Employee Requirements | SFO Minimum 1 investment professional with a minimum monthly salary of RM10,000
SFOV Minimum 2 full-time employees (at least 1 investment professional), with a minimum monthly salary of RM10,000 each | SFOV Minimum 4 full-time employees |
B. Unprecedented Tax Incentives Under The FCSFZ
A major highlight of the panel discussion was the introduction of a 20-year (10+10 years) tax exemption for SFOVs under the FCFSZ. The panel members highlighted that this incentive is a first of its kind, positioning Malaysia as a competitive alternative to other established financial hubs such as Singapore and Hong Kong.
Notably, the FCSFZ has set a lower asset under management (AUM) threshold for SFOVs to qualify for these incentives — RM30 million— compared to Singapore’s SGD20 million and Hong Kong’s HKD240 million requirements. This lower threshold enhances Malaysia’s appeal as a jurisdiction for wealthy families considering SFO structures.
A common concern among high-net-worth families is whether these incentives will remain in place despite potential changes in government. According to Datuk Naban, once an SFO and SFOV are established under the FCSFZ, they obtain a vested right or entitlement to the tax incentives, when in turn provides certainty and security for families seeking to benefit from this initiative.
C. Structuring For Intergenerational Wealth Preservation
Speaking from a legal point of view, Datuk Naban stressed the importance of careful structuring when establishing an SFO. He highlighted the role of discretionary trusts, particularly with the appointment of a protector and appointor, as an effective mechanism to preserve wealth across generations. For illustration:
By holding assets within a discretionary trust, families can ensure that wealth is safeguarded and passed down in accordance with their long-term succession plans. Additionally, this structure mitigates risks associated with asset distribution in events such as divorce, providing an added layer of protection to ensure that family wealth remains intact and is not subject to division in marital disputes.
D. Clarification On “Local Eligible And Promoted Investment”
Although the definition of “local eligible and promoted investment” is still in a draft form and subject to finalization by the Securities Commission (SC), it is expected to include:
·Malaysian capital market products regulated by the SC, where the underlying assets must be Malaysian-based, such as securities, derivatives, unit trust schemes (excluding money market funds), structured products, equity crowdfunding, peer-to-peer lending, discretionary mandates, and private equity funds.
·Investments in local sectors endorsed by the government, including start-ups, venture capital funds, impact funds, sustainable and responsible investment (SRI) funds, and Islamic capital market products.
·A 1.5x multiplied applied in the computation to meet the local eligible investment requirement, further incentivizing participation in these promoted investments.
E. Conclusion
Malaysia’s FCSFZ presents a compelling opportunity for high-net-worth families to establish SFOs with attractive tax incentives, competitive entry threshold, and cost advantages for wealth preservation—the potential for Malaysia to emerge as a viable alternative to Singapore and Hong Kong for housing SFOs in the region is high.
In line with this growing potential, RDS Partnership has entered into a strategic alliance with DeHeng Law Offices, one of the largest Chinese law firms with 6,000 lawyers in 46 offices in China and 16 overseas worldwide. As part of our commitment to servicing international clients, we have already set up a joint office in the FCSFZ, with final renovations currently underway. Additionally, we have received numerous queries from Chinese clients regarding the establishment of SFOs in the FCSFZ, reflecting the growing interest in Malaysia as a preferred jurisdiction for wealth management.
For further advise on structing an SFO in Malaysia and leveraging these incentives, please contact our RDS tax partners, Datuk Naban (naban@rdslawpartners.com), S. Saravana Kumar (sara@rdslawpartners.com) or Nur Amira Azhar (amira@rdslawpartners.com).
24 Februay 2024