The Malaysian government has introduced tax incentives to speed up the development of Forest City in Johor, aiming to transform it into a significant financial and economic center. This ambitious 1,400-hectare private development has encountered challenges in meeting its growth targets since it was established. The new incentives are intended to address these obstacles and establish Forest City as a top choice for international businesses and high-net-worth individuals.
Special corporate and personal income tax rates to attract businesses and workers
To attract companies and skilled professionals, the government offers discounted corporate tax rates ranging from 0% to 5% for businesses that establish themselves in Forest City. Additionally, knowledge workers and Malaysians working in this special financial zone will benefit from a personal income tax rate of 15%. Finance Minister II, Datuk Seri Amir Hamzah Azizan, stated that these incentives are expected to attract businesses, financial institutions, and wealthy individuals, thereby further enhancing Forest City’s investment appeal.
To go even further, Malaysia is introducing a 0% tax rate for family offices, marking the first time the country has implemented such a structure. This initiative aims to attract wealthy families from Asia and beyond to manage their assets in Malaysia, with the scheme expected to be operational by the first quarter of 2025. “Supported by good infrastructure, a competitive talent pool, robust common law practices, and effective governance, opportunities abound for family offices,” Amir added.
Positioning Forest City as a financial services hub with additional incentives
The government is also positioning Forest City to become a hub for global business services, financial technology firms, and foreign payment system operators. These entities will be subject to a special 5% tax rate. Financial institutions, including banks and insurance companies, will receive additional incentives such as deductions on relocation costs, enhanced industrial building allowances, and withholding tax exemptions. Locally incorporated foreign banks operating in the special financial zone will have the flexibility to open additional branches and benefit from foreign exchange flexibilities.
Malaysian government aims to revive Forest City and make it a global financial player by 2030
Originally planned to house up to 700,000 residents, Forest City currently accommodates far fewer people and has struggled to achieve its ambitious growth targets. In August 2023, Prime Minister Datuk Seri Anwar Ibrahim designated Forest City as a special financial zone in a strategic move to rejuvenate the development. The new tax incentives are expected to attract international businesses and high-net-worth individuals, boosting the region’s economic profile. The government aims to make Forest City a key player in the global financial landscape by 2030.
For individuals from abroad looking to invest in Malaysian real estate or purchase a holiday home, these developments offer a special opportunity. The attractive tax incentives combined with the government’s dedication to transforming Forest City into a financial hub could result in a substantial appreciation of property values. Investors may find Forest City appealing because of its strategic location, modern infrastructure, and favorable tax environment.
