Benefits of setting up a Family Office in Forest City – why it is a better option than Singapore

The Forest City Single-Family Office Scheme (SFO Scheme) offers unique advantages, including lower Assets Under Management (AUM) requirements and a zero percent tax rate for Single-Family Offices (SFO) in Forest City, Malaysia. Singapore is currently home to around 60% of Asia’s Family Offices, proof of its dominance over other countries as a hub for Family offices. Malaysia seeks to carve out its niche by appealing to family offices that may not meet Singapore’s stringent criteria. As Malaysia’s Second Finance Minister stated, “We want to welcome family offices, but we are not competing directly with Singapore, as there are some groups that are not serviced by Singapore, so we (will) set clear criteria to attract those groups to set up within Malaysia.” This article explores why Forest City might be the better choice for certain Family Offices.

Why Forest City?

The SFO Scheme provides a range of incentives to attract Family Offices to Forest City, including:

0% Tax Rate: Income generated by eligible investments from SFOVs is exempt from tax.
Long-Term Incentives: The tax benefit is granted for an initial period of 10 years, extendable for another 10 years subject to meeting additional criteria.

Key eligibility requirements for the scheme include:

For the Initial Period (10 years):
- AUM of at least RM30 million,
- The SFOV must be a new investment holding company incorporated in Malaysia and seek pre-registration with the Securities Commission (SC) on the eligibility of the tax incentives,
- Establish a registered office in Pulau 1, Forest City Special Financial Zone (SFZ),
- Hold assets under management (AUM) of at least RM30 million,
- Allocate at least 10% AUM or RM10 million (whichever is lower) to local investments,
- SFOV to locally spend a minimum operating expenditure of RM500,000 annually; and
- Employ a minimum of two full-time employees, including at least one investment professional, with a minimum monthly salary of RM10,000.

To qualify for the Additional Period (an additional 10 years):
- Hold AUM of at least RM50 million,
- Allocate at least 10% of AUM or RM10 million (whichever is higher) to local investments,
- SFOV to locally spend a minimum operating expenditure of RM650,000 annually; and
- Employ a minimum of four full-time employees, including two investment professionals.

The scheme’s lower entry barrier and its tax-free investment environment are designed to attract smaller family offices and those unable to meet Singapore’s more stringent requirements.

How do Forest City and Singapore differ?

	Forest City SFO Scheme	Singapore Section 13O: Onshore Fund Tax Incentive Scheme
Minimum AUM Requirement	RM30 million (around S$9 million)	S$20 million 9 (around RM65 million)
Employment of Investment Professional(s) Requirement	Employ at least one investment professional with a minimum monthly salary of RM10,000 (around S$3000).	Employ a minimum of 2 professionals, of whom at least 1 is not a family member of the beneficial owners. The qualified investment professionals must be Singapore tax residents with formal work experience or academic qualifications. They must be paid at least S$3,500 per month and engage more than 50% of the time in the qualifying activity.
Minimum Local Spending Requirement	Locally spend a minimum operating expenditure of RM500,000 (around S$150,000) annually.	Local business spending of a minimum of S$200,000 if the AUM is under S$50 million.
Benefit	Zero percent tax rate: no tax is applied to investment income.	Tax exemption: Income from specified investments is not subject to tax.

Key Advantage: The lower thresholds in Forest City’s SFO scheme make it more accessible and cost-effective options for smaller Family Offices that might not qualify for Singapore’s Section 13O: Onshore Fund Tax Incentive Scheme.

The Zero Percent Tax Rate: Why It Matters

The zero percent tax rate in Forest City directly impacts returns, allowing family offices to retain and reinvest a greater portion of their income. By eliminating tax burdens on eligible investment income, this incentive significantly boosts profitability and wealth preservation, especially for offices with mid-tier AUMs.

Why Choose Forest City Over Singapore?

While Singapore offers a well-established ecosystem for family offices, Forest City’s SFO Scheme targets a different demographic:

Family offices with AUMs below Singapore’s threshold (S$20 million) but above RM30 million.
Offices seeking lower operational costs and tax-free investment returns.
A growing financial zone that combines affordability with strategic proximity to Singapore.

SFOs with lower AUM and lower monthly operating budgets can be set up in Forest City and qualify for incentives, whereas such SFOs may not meet the requirements for tax exemption in Singapore. While Singapore boasts a mature and well-developed infrastructure for Family Offices, its higher thresholds for incentives can discourage smaller Family Offices from establishing themselves in Singapore. Forest City, as an emerging SFZ, offers a lower cost of entry for Family Offices. The incentives under the SFO Scheme can position Forest City as an attractive hub for Family Offices that appeals to a different demographic from Singapore. For SFOs that do not qualify for tax exemption in Singapore, the zero percent tax rate in Forest City makes it a financially advantageous choice.

Forest City’s SFO Scheme is not intended to compete directly with Singapore, but rather to complement the region’s offerings by addressing the needs of smaller or emerging Family Offices. Its lower thresholds and tax-free environment make it an excellent choice for those unable to meet Singapore’s stringent requirements. For SFOs with between roughly S$10 million and less than S$20 million, they can enjoy zero percent tax rates in Forest City while being subject to tax in Singapore, making Forest City the clear choice in such cases.

Do contact our Malaysian Team lead (Nathan Maharajah) at enquiry@familyofficeforestcity.my or WhatsApp at +65 9810 1685 for further details. The InterAsia Law Alliance has a team of Malaysian-qualified lawyers and any Malaysian law advice required for the setting up of your Family Office will be handled by our experienced Malaysian lawyers.