Forest City Special Financial Zone — Not the Same Thing as the JS-SEZ

Two schemes sit on the same stretch of Johor coastline, and almost every summary written about them merges the two. The result is advice that sends a manufacturer to the Securities Commission and a family office to MIDA.

They are different schemes. The Forest City Special Financial Zone (SFZ) is a financial services zone whose incentives were gazetted in eleven instruments on 3 October 2025. The Johor-Singapore Special Economic Zone package is a manufacturing and services package run by MIDA under a guideline that has not been gazetted at all.

Forest City is Flagship I of the nine JS-SEZ flagship zones. MIDA’s own guideline says so, and in the same paragraph excludes it: the MIDA package covers Flagships A to G, and Forest City runs on a package announced separately on 20 September 2024.

Where the zone actually is

Every one of the eleven orders defines the zone identically: Pulau 1, Forest City, situated in the Mukim of Tanjung Kupang, District of Johor Bahru, Johore, as shown in Gazette Plan PW50276 deposited in the Office of the Director of Survey and Mapping, Johore.

That is a surveyed parcel — one island — not the whole Forest City development and certainly not Iskandar Puteri. An address inside Forest City is not by itself an address inside the SFZ.

Who counts as a qualifying person

The same nine-limb definition recurs across the orders, and it is worth reading as a whole because it tells you exactly what the zone is for:

• a person licensed under section 10 of the Financial Services Act 2013 or the Islamic Financial Services Act 2013;
• a Capital Market Services Licence holder under the Capital Markets and Services Act 2007;
• a recognised market operator registered under s.34 of that Act, other than an individual;
• a registered person under s.76, other than an individual;
• a person providing capital market services registered under s.76A, other than an individual;
• a single family fund company verified by the Securities Commission;
• a fintech, insurtech, regtech or Islamic fintech company holding MSC Malaysia Status or Malaysia Digital Status and verified by MDEC;
• a foreign payment system operator approved under s.11 of the Financial Services Act 2013 or the Islamic Financial Services Act 2013 to operate a payment system in the zone; and
• a centralised services entity providing financial global business services with MSC Malaysia or Malaysia Digital Status, verified by MDEC.

Note the two gatekeepers. Family offices go through the Securities Commission. Fintech and financial global business services go through MDEC, riding on the Malaysia Digital framework. MIDA appears nowhere.

The single family office scheme

This is the headline, and the one that draws the most inaccurate summaries.

Under P.U.(A) 350/2025, made under s.154(1)(b) read with s.6(1A) and paragraph 2 of Part XVII of Schedule 1 to the Income Tax Act 1967, the rate of income tax on the chargeable income of an approved company carrying on a qualifying activity is zero per cent for the first period of ten years of assessment, and zero per cent for the following ten.

The rate does not step up. The conditions do.

	First 10 years of assessment	Following 10 years of assessment
Assets under management	≥ RM30 million	≥ RM50 million
Local investment	≥ RM10 million or 10% of AUM, whichever is lower	≥ RM10 million or 10% of AUM, whichever is greater
Full-time employees	≥ 2, one a professional investor on ≥ RM10,000 salary	≥ 4
Annual local operating expenditure	≥ RM500,000	≥ RM650,000
Bank deposits for local investment	Not permitted	—
Other business in Malaysia	None permitted	—

The lower / greater switch in the local investment test is the single most easily missed detail in the scheme. In the first decade, a family office with RM100 million under management invests RM10 million locally. In the second, the same office must invest RM10 million. But an office that has grown to RM300 million under management invests RM10 million in decade one and RM30 million in decade two. The obligation scales with success.

Each year, the approved company must obtain a certification from the Securities Commission that the conditions were met. Applications for the scheme are made to the Minister through the Securities Commission between 1 September 2024 and 31 December 2034, and the specified years of assessment run from the year the first certification is obtained.

The scheme also requires compliance with s.65B of the Income Tax Act 1967 and with any Securities Commission guidelines.

And it is exclusive. A company is not a qualifying company if, in the specified years, it claims a Schedule 7B investment allowance, holds a Promotion of Investments Act 1986 incentive, holds a s.127(3)(b) or s.127(3A) exemption, or has another approved s.154 incentive scheme. Only three deductions survive: Schedule 3 allowances, audit expenditure under P.U.(A) 129/2006, and secretarial and tax filing fees under P.U.(A) 162/2020.

The companion exemption for getting assets in

A family office is useless if you cannot move the family’s assets into it without a tax charge on the way. P.U.(A) 351/2025 handles that.

The Minister exempts a company, limited liability partnership, trust body or co-operative society wholly owned directly or indirectly by a member of a single family from income tax on gains or profits from disposing shares of an unlisted Malaysian company to a single family fund company.

The conditions are tight. The fund company must hold a Securities Commission certification letter; the disposal must be made within twelve months from the date that letter is issued; the disposal must fall between 1 September 2024 and 31 December 2034; and the ultimate beneficial owners on both sides must be members of the same single family.

Two exclusions matter. The order does not apply where the gain is chargeable as business income under s.4(a) — a share-dealing business cannot use it. And it does not apply where a s.127(3)(b) or s.127(3A) exemption has already been granted on the same disposal. Losses on such disposals are disregarded for s.65E(5) and (6).

“Single family” is defined across all the orders as individuals who are lineal descendants of a single ancestor, including spouse, biological child, stepchild, and a child adopted under any written law.

Withholding tax relief for foreign service providers

P.U.(A) 357/2025 exempts any non-resident person from Malaysian income tax on income from s.4A(i), s.4A(ii) and s.4A(iii) services and rentals, and on s.4(f) gains and profits, where the income is received on or before 31 August 2034 from a qualifying person operating in the zone.

Crucially, paragraph 3 states that ss.109B and 109F shall not apply to that income. That removes the withholding obligation itself, not merely the ultimate charge — the practical difference between a payer having to withhold and reclaim, and simply paying gross.

The property and set-up reliefs

Industrial building allowance (P.U.(A) 359/2025). A commercial building constructed or purchased by a qualifying person in the zone is deemed an industrial building for Schedule 3 purposes, provided the qualifying person owns it and uses it for a listed business activity. The allowance is one-tenth of the capital expenditure in the year and each of the nine following years. Capital expenditure incurred after 31 December 2034 does not qualify.

There is a genuine clawback here, and it is the only one in the package: if the building is disposed of within two years of the capital expenditure being incurred — by sale, transfer, assignment, demolition, destruction, or ceasing to be used for the Rules’ purposes — a balancing charge equal to the whole allowance granted is charged in the year of disposal.

Relocation cost deduction (P.U.(A) 360/2025). A deduction for the cost of relocating a business into the zone, capped at RM500,000, covering planning, execution or supervision of the relocation, packing and unpacking, transportation, insurance premiums for the relocation, and warehousing. Relocation must occur between 1 September 2024 and 31 December 2034, and the cost must be certified by an external auditor.

Real property gains tax (P.U.(A) 358/2025). Individuals who are not citizens and not permanent residents are exempted from part of the Schedule 5 charge on disposals in the zone: in the fourth year after acquisition the effective charge is reduced to 20 per cent, in the fifth year to 15 per cent, and from the sixth year onwards the gain is fully exempt. The sale and purchase agreement must be executed between 1 September 2024 and 31 July 2034 and duly stamped before 1 September 2034.

Stamp duty. Four orders, all remitting 50 per cent:

• P.U.(A) 353/2025 — loan or financing agreements for individuals buying a residential or commercial unit;
• P.U.(A) 354/2025 — instruments of transfer between a developer and individuals;
• P.U.(A) 355/2025 — loan or financing agreements for qualifying persons;
• P.U.(A) 356/2025 — instruments of transfer between a developer and qualifying persons.

All four carry the same restriction, and it is severe: the unit’s construction must have been completed before 1 September 2024, and the sale and purchase agreement must be executed between 1 September 2024 and 31 December 2034. There is also an anti-churn rule — the relief is unavailable where an agreement for the same unit was executed before 1 September 2024 and later cancelled by the same buyer. The Iskandar Regional Development Authority verifies compliance with these conditions.

Separately, P.U.(A) 352/2025 fully exempts stamp duty on an instrument transferring a qualifying asset between a single family fund company and a family member or a family-owned company or trust body, executed within one year of the Securities Commission certification letter, with the letter attached.

Common mistakes

Calling Forest City part of the JS-SEZ incentive package. It is inside the zone and outside the package. MIDA’s guideline draws the line explicitly.

Sending a manufacturer to Forest City. The nine qualifying-person limbs are all financial services, fintech or family office. There is no manufacturing route.

Assuming the family office rate steps up after ten years. It does not — it stays at zero. The substance requirements rise instead, and the local investment test flips from whichever is lower to whichever is greater.

Missing the twelve-month window on share transfers into the fund company. The exemption in P.U.(A) 351/2025 runs twelve months from the date of the Securities Commission certification letter, not from incorporation and not from the start of the scheme.

Buying a new-build and expecting stamp duty relief. All four stamp duty orders require construction to have been completed before 1 September 2024. The relief was designed to clear existing stock.

Stacking incentives. The family office rules disqualify a company holding a Promotion of Investments Act incentive, a s.127(3)(b) exemption, or another s.154 scheme.

Forgetting the two-year disposal rule on the industrial building allowance. Selling a building inside two years triggers a balancing charge equal to the whole allowance claimed.

What’s next

If you are setting up a family office, the route is an application to the Minister through the Securities Commission, and the practical work is engineering the substance — AUM, local investment, headcount and local operating expenditure — so that annual certification is comfortable rather than marginal in both decades.

If you are a fintech or a financial global business services entity, the entry point is Malaysia Digital or MSC Malaysia Status through MDEC, then verification for the zone.

If you are a manufacturer or a services operator, you are looking at the wrong scheme. Read the JS-SEZ guide instead, and check which flagship zone your activity is assigned to before doing anything else.