Special Zones and Hub Incentives Compared on Tax

Two zones sit about twenty kilometres apart in south Johor, and the market treats them as one thing. They are not. The Forest City Special Financial Zone is a Securities Commission regime for financial services. The JS-SEZ package is a MIDA regime for manufacturing and services. Different applications, different regulators, different qualifying persons, different instruments — and, as it happens, very different levels of legal completeness.

MIDA’s own guideline is the source of the confusion and also the fix. It lists nine flagship zones for the JS-SEZ and names Forest City as Flagship I. Then it states that the guideline covers Flagships A to G only, that Pengerang (Flagship H) was dealt with in the 2024 Budget, and that Forest City (Flagship I) had a comprehensive package of incentives announced on 20 September 2024. Geographically inside; administratively separate.

What does each zone actually give you?

Regime	Regulator	Who qualifies	Headline rate	Tenure
JS-SEZ — manufacturing	MIDA	AI and quantum supply chain, medical devices, pharmaceuticals, aerospace and MRO	5% above RM1 billion capex excluding land; 5% at RM500m–RM1bn	15 years; 10 years respectively
JS-SEZ — specialty chemicals	MIDA	Base chemicals, organic intermediates, specialty chemicals, fertilisers, polymers, oleochemicals	Tier 1 5%, Tier 2 10%; or ITA of 100% / 60%	Up to 10 years, as 5 plus 5
JS-SEZ — Global Services Hub	MIDA	Regional P&L plus strategic planning, corporate development, treasury and two more services	5% on services or trading and services income	15 years
JS-SEZ — smart logistics	MIDA	Regional distribution hub, integrated logistics, dangerous goods, cold chain	ITA 100%, against 100% of statutory income	Capex within 5 years
JS-SEZ — integrated tourism	MIDA	Hotel of 80+ rooms plus one attraction	ITA 100%, against 70% of statutory income	Capex within 5 years
Forest City SFZ — family office	Securities Commission	Single family fund company on Pulau 1	0%, then 0%	10 years of assessment, then a further 10
National Global Services Hub	MIDA	Same functions, lower thresholds	Tier 1 5%, Tier 2 10%	5 or 10 years for a new company; 5 years for an existing one, on value-added income

The JS-SEZ window runs on applications received by MIDA from 1 January 2025 to 31 December 2034. The national Global Services Hub runs 14 October 2023 to 31 December 2027 — it replaced the Principal Hub, which the MIDA guideline records as having ended on 31 December 2022.

Where the substance conditions actually bite

Rates are the part everyone quotes. The conditions are the part that decides whether you keep them, and the two Global Services Hub tracks make the point better than anything else, because they share a name and nothing else.

Condition	National GS Hub	JS-SEZ GS Hub (Flagships A and B)
Paid-up capital	RM2.5 million	RM2.5 million
Annual operating expenditure	As proposed, evaluated by MIDA	At least RM50 million
Network companies served	7, including 3 related	10
Annual sales turnover (trading income)	As proposed	At least RM500 million
High-value positions at RM10,000 a month	At least 50% filled by Malaysians	At least 50% filled by Malaysians
Key personnel at RM35,000 a month	Not a stated minimum	At least 5
Structured training	Not stated	20% of the workforce during the incentive period
MySIP interns	Not stated	At least 3 Malaysian students a year
Mandatory functions	Regional P&L, strategic planning, corporate development, plus two	The same plus regional or global treasury and fund management via onshore intermediaries

A company that would comfortably clear the national scheme can fail the JS-SEZ version on operating expenditure alone. The higher rate tenure — fifteen years against five or ten — is what is being bought with those thresholds.

Forest City’s substance test is different in kind, because it is a fund test rather than a headcount test. Under rule 6 of P.U.(A) 350/2025, an approved single family fund company must obtain annual certification from the Securities Commission that, in each of the first ten years of assessment, it has at least two full-time employees, one of them a professional investor on at least RM10,000, annual local operating expenditure of at least RM500,000, assets under management of at least RM30 million, and local investment of at least RM10 million or 10% of AUM, whichever is lower. It must not have used bank deposits for local investment and must carry on no other business in Malaysia. For the second ten years the bar rises: AUM of RM50 million, local investment of RM10 million or 10% of AUM whichever is greater, four full-time employees, and local operating expenditure of RM650,000.

The clawback is annual, and that is the design

Nothing here is granted once and kept. The JS-SEZ guideline states it plainly: where an approved company fails to comply with the stipulated conditions in any year of assessment during the special tax rate incentive period, it is not entitled to claim the special rate for that particular year and is taxed at prevailing rates. The Annual Compliance Report is due to MIDA within seven months after the end of each year of assessment, for the whole incentive period.

Two dated traps sit in front of that.

Apply before the first sales invoice. Commencement of operation is defined as the date of the first sales invoice issued for the proposed project. Issue it first and the application is out of time.

Then hit the determination clock. For a special tax rate, the application for determination of the commencement year of assessment is due not later than 24 months from the approval letter. For an ITA, it is 36 months, and the JS-SEZ chemicals appendix states that failure means the approval-in-principle letter is automatically cancelled.

Tiering follows the same annual logic as the New Incentive Framework: meeting the minimum conditions earns Tier 2 for that year, meeting minimum plus additional conditions earns Tier 1, and missing the minimum earns nothing for that year.

What Forest City has that JS-SEZ does not

Forest City is legally the more finished of the two, and by a wide margin. On 3 October 2025 eleven instruments were gazetted together, all keyed to Pulau 1 as shown in Gazette Plan PW50276:

• P.U.(A) 350/2025 and 351/2025 — the Single Family Office rate and a companion exemption on the disposal of unlisted Malaysian shares into a single family fund company, for disposals made 1 September 2024 to 31 December 2034 within twelve months of the SC certification letter.
• P.U.(A) 357/2025 — exemption for non-residents on s.4A and para 4(f) income received from qualifying Pulau 1 persons on or before 31 August 2034, expressly disapplying ss.109B and 109F. That is a withholding tax carve-out most zone comparisons miss entirely.
• P.U.(A) 358/2025 — RPGT relief for non-citizen, non-PR individuals, reducing the Schedule 5 Part III charge to an effective 20% in year four, 15% in year five and nil from year six, on an SPA executed 1 September 2024 to 31 July 2034 and stamped before 1 September 2034.
• P.U.(A) 359/2025 and 360/2025 — industrial building allowance on capital expenditure incurred by 31 December 2034, and a deduction for business relocation cost.
• P.U.(A) 352/2025 to 356/2025 — stamp duty exemptions and remissions.

The qualifying-person list in those orders is what makes Forest City a financial zone rather than an industrial one: persons licensed under s.10 of the Financial Services Act 2013 or the Islamic equivalent, Capital Markets and Services Licence holders, recognised market operators under s.34, registered persons under ss.76 and 76A, SC-verified single family fund companies, fintech and insurtech companies with MSC Malaysia or Malaysia Digital status verified by MDEC, and foreign payment system operators approved under s.11. No manufacturer appears anywhere on that list.

What Forest City still lacks is a gazetted special tax rate for those licensed institutions. The 20 September 2024 announcement is referenced in MIDA’s own guideline; the corresponding rate order is not in the gazette. The only Forest City corporate rate with an instrument behind it is the family office 0%.

And the corridors?

On tax, the corridors are thinner than their marketing suggests. Only two corridor instruments could be confirmed against gazetted text, and both are shut.

The State of Kelantan Special Incentive Scheme, P.U.(A) 269/2025, gives 0% for fifteen years of assessment, then 17% for five, extendable by a further five, with a companion 15% C-Suite rate for five years under P.U.(A) 270/2025 — but rule 5(1) closed applications through ECERDC on 31 December 2024, and the rules were only gazetted on 26 August 2025. The ECER knowledge-worker rate of 15% under Schedule 1 Part XIV, P.U.(A) 330/2023, closed on the same date and reaches only employment inside the Malaysia-China Kuantan Industrial Park.

For Iskandar Malaysia, the Northern Corridor, the Sabah Development Corridor and the Sarawak corridor, no current gazetted income tax rate instrument was located. That is a negative finding against an index current to 8 July 2026, not an assertion that nothing exists — but it does mean any corridor rate you are quoted should come with an instrument number before you build a model on it. The corridors remain real as location decisions; see the JS-SEZ guide, Iskandar Malaysia, ECER and NCER for that side of it.

Common mistakes

Applying to MIDA for a Forest City financial services incentive. Forest City qualifying persons are verified by the Securities Commission, and the family office application under rule 5 of P.U.(A) 350/2025 goes to the Minister through the SC. MIDA’s package stops at Flagship G.

Quoting the JS-SEZ 5% without the capital threshold. The 15-year tenure requires capital investment excluding land above RM1 billion. Between RM500 million and RM1 billion the same 5% runs for 10 years. Below RM500 million, the manufacturing scheme does not apply at all.

Treating an approval letter as a claimable relief. For JS-SEZ, the Global Services Hub and the New Incentive Framework alike, the guideline says the rate is still to be provided through subsidiary legislation, and none has been gazetted.

Assuming a zone rate beats the Pillar Two floor. Both guidelines flag the Domestic Top-Up Tax themselves. For a group above EUR 750 million, a 5% zone rate is not a 5% outcome.

Treating the Kelantan gazette date as an opening. The rules arrived eight months after applications closed. The AGC index will not tell you — the status field still reads PRINCIPAL, which is an instrument type and not an in-force flag.

Assuming Budget 2026 moved something. It did not. The Langkah Cukai appendix carries no measure on the special economic zones, Forest City or the services hub, and it is the document that states position against proposal explicitly.

What’s next

Decide the regulator before the rate. If the activity is licensed financial services, capital markets or a family office, the route is the Securities Commission and Pulau 1. If it is manufacturing, logistics, tourism or a services hub, the route is MIDA and Flagships A to G, through investmalaysia.mida.gov.my and the Invest Malaysia Facilitation Centre Johor.

Then check three dates against your own project plan: the application must land before your first sales invoice; the determination application is due within 24 months for a rate or 36 months for an ITA; and the Annual Compliance Report is due within seven months after each year of assessment. Missing the first two ends the incentive outright. Missing the third costs you a year.

Finally, ask MIDA or the SC in writing which instrument your relief will be issued under, and keep the reply on file. For the incentive landscape outside the zones, see the tax incentives directory and the New Incentive Framework.