Budget 2026: What It Means for Family Offices in Malaysia
Positioning for Growth: An Analysis of Malaysia's Forest City Family Office Incentive
The 2026 Budget Speech delivered by Prime Minister Datuk Seri Anwar Ibrahim on 10 October 2025 cast a spotlight on the notable early success of the Forest City Special Financial Zone. The government announced the approval of six Single Family Offices, representing nearly 400 million Ringgit in assets under management (AUM) in under a year, with a strong pipeline of 30 more offices expressing interest. This momentum firmly supports the official optimism that Malaysia is on track to achieve its target of 2 billion Ringgit AUM by the end of 2026.
This political endorsement reinforces the confidence previously signaled by the Securities Commission. For families and their advisors, the fundamental question remains: what is the concrete value proposition of this scheme?
A Strategic Overview
Forest City Family Office Incentive
The framework is both elegant and strategic, built around two distinct entities:
- The Single Family Office Vehicle (SFOV): This private limited company acts as the central repository for the family's wealth, consolidating everything from listed securities and real estate to intellectual property. Its core benefit is a generous 10-year tax exemption, which is renewable for a further 10 years.
- The Single Family Office (SFO) Management Company: This is the dedicated management company that administers the SFOV's assets. Although the SC documents provide licensing exemptions for SFOs that exclusively serve their own SFOV, the SFO Management Company is not eligible for the tax incentive scheme. Its fee-based income remains taxable, as the current framework does not extend full tax exemption under the service sector incentive.
This two-company model creates a powerful, integrated structure for holistic wealth management.
Tax Advantages and Transfer Exemptions
Often, the biggest hurdle in establishing a family office is the immediate tax cost of transferring assets. The Forest City scheme effectively removes this barrier by providing exemptions on the transfer of assets into the SFOV, covering:
- Capital Gains Tax (CGT): While Malaysia does not have a broad-based capital gains tax, it does tax gains from the disposal of unlisted shares by companies, Limited Liability Partnerships (LLPs), cooperatives, and trust bodies. This specific capital gains tax is exempted for transfers into the SFOV.
- Stamp Duty: The legal documentation for the transfer of assets (e.g., share transfer forms, property deeds) would normally attract stamp duty. This duty is exempted for qualifying transfers to the SFOV.
One will note that certain taxes will still apply, for example, income tax on transfer of assets which are “stock-in-trade” and Real Property Gains Tax on transfer of property to the SFOV.
In essence, the scheme allows for a tax-neutral "entry" into the structure. This is a critical "deal-maker," as being forced to pay these taxes upfront would make the entire proposition financially unviable for most families, regardless of the long-term holding benefits.
Ongoing Tax-Free Benefits for Long-Term Growth
The benefits extend far beyond the initial transfer. During the holding period, the SFOV is exempt from the following taxes tax, capital gains tax and tax on foreign sourced income including:
- Taxes on all income such as dividends, interest and royalties
- Income tax on foreign sourced income
- Capital gains tax on disposals of unlisted company shares
This allows all returns to be reinvested and compound in a tax-free environment, the tax scheme is a significant accelerator for long-term, multi-generational wealth growth.
Operational and Eligibility Requirements
Naturally, the strategic advantages must be weighed against the operational commitments. The scheme is designed for families with substantial, ongoing taxable income, where the long-term tax savings can significantly outweigh the costs.
The requirements for a substantive presence in Forest City include:
- Employing at least two full-time Malaysian employees at a minimum monthly salary of RM10,000, one of whom is an investment professional.
- Maintaining a physical office of at least 450 square feet in Forest City.
- Meeting a minimum annual operational spend of RM 500,000.
- The SFOV must hold assets under management (AUM) of at least RM30 million of which at least 10% of the AUM or RM10 million, which is lower, is invested in local eligible and promoted investments.
For the right family, this is not merely an expense, but a strategic investment into a highly efficient wealth preservation structure.
Why Malaysia’s Family Office Incentive Matters
Malaysia's Forest City Single Family Office Incentive is a thoughtfully crafted and competitive offering. By combining a tax-neutral setup with a long-term exemption on investment growth and a supportive ecosystem for the management company, it presents a compelling case for families looking to secure and enhance their legacy in a dynamic region.
How Crowe Can Support Your Family Office Journey
If you have any questions on Family Offices, please contact our Family Office professionals. We provide a full range of Family Offices encompassing the following:
- Wealth planning and structuring
- Family governance
- Corporate services for family offices
- Tax planning and structuring
Plan smarter with Crowe Malaysia. Talk to our Family Office experts today.
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