In recent years, Malaysia has emerged as a strategic location for high-net-worth individuals seeking to manage their wealth efficiently.
The increasing complexity of global financial landscapes has made centralized wealth management solutions like family offices increasingly valuable.
For high-net-worth families in Malaysia, establishing a family office represents a strategic approach to preserving, growing, and transmitting wealth across generations.
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (hello@adamfayed.com) or WhatsApp (+44-7393-450-837).
This includes if you are looking for a second opinion or alternative investments.
Some facts might change from the time of writing. Nothing written here is financial, legal, tax, or any kind of individual advice or a solicitation to invest.
This guide on how to set up a family office in Malaysia provides insights into the SFO scheme, costs, taxes, and the step-by-step establishment process.
Family offices generally fall into two distinct categories:
Single Family Office (SFO):
Multi-Family Office (MFO)
In the Malaysian context, a Single Family Office (SFO) is a corporate vehicle wholly owned or controlled by members of a single wealthy family.
It is created to exclusively manage their assets, investments, and long-term interests.
It may represent multiple generations and branches of the same family, centralizing and formalizing decision-making processes for high-net-worth individuals.
The typical structure comprises:
This structure allows for a clear separation of management and ownership, ensuring efficient wealth management while maintaining family control.
Family offices in Malaysia offer a comprehensive range of services, including:
Unlike traditional wealth management services, family offices in Malaysia provide a more personalized approach, tailored to meet each family’s unique requirements, values, and long-term objectives.
They serve as a holistic solution for high-net-worth families, addressing both financial and non-financial needs.
The Single-Family Office Scheme in Malaysia is a government initiative by the Securities Commission Malaysia (SC).
It is designed to position the country as a preferred destination for high-net-worth families looking to manage and grow their wealth efficiently.
Malaysia’s Single-Family Office (SFO) Scheme offers a structured and tax-efficient environment for families to manage their assets, investments, and long-term interests.
Announced by the Minister of Finance II on 20 September 2024, the scheme is set to be operational by the first quarter of 2025.
A notable aspect of this scheme is its connection to the Forest City Special Financial Zone (FCSFZ), which was introduced by Prime Minister Anwar Ibrahim on August 25, 2023.
Forest City SFZ is the first location in Malaysia that offers a single-family office scheme, making it a unique and strategic choice for wealthy families.
As mentioned earlier, to participate in the SFO scheme, two wholly owned companies must be established:
Both entities must maintain physical operations based in Pulau Satu, located in the FCSFZ.
The SFOV must also be registered with the Securities Commission Malaysia.
The SC oversees the scheme and issues certifications to eligible SFOVs.
Notably, the management company or SFO may be exempted from licensing requirements under the Capital Markets and Services Act 2007.
Only if they can demonstrate that their management services are provided solely for the benefit of an SFOV which is its related corporation.
However, the SC may still impose terms and conditions on the SFO according to section 58 of the CMSA.
Setting up a family office in Malaysia involves several costs, from registration fees to operational expenditures.
Understanding these costs is crucial for high-net-worth families planning to establish a presence in the country.
Here is a snapshot of all the costs associated with setting up a family office in Malaysia.
Incorporation Fees:
For a Local Private Limited Company, the costs are as follows:
For a Foreign Company with Share Capital, the costs are:
For a Foreign Company with No Share Capital: RM 70,000 flat rate for foreign entities.
SFO Scheme-Specific Substance Requirements
The tax incentive for family offices in Malaysia is one of the most compelling reasons for high-net-worth families to consider the country.
Eligible SFOVs can enjoy a 0% concessionary tax rate on income generated by eligible investments for a period of 10 years (initial period).
This can be extended for an additional 10 years (additional period) subject to fulfilling certain requirements.
To qualify for the tax incentive during the initial 10-year period, an SFOV must meet several conditions:
For the tax incentive to be extended for an additional 10 years, the SFOV must meet higher substance and financial requirements:
Additionally, employees in the Forest City Special Financial Zone may benefit from a reduced income tax rate of 15%.
Establishing a family office in Malaysia involves a comprehensive process from planning to implementation. Here’s a step-by-step guide:
Conduct a thorough analysis of the potential benefits, costs, and challenges.
This should include capital structuring, profit repatriation strategies, corporate tax considerations, and workforce planning.
Decide on the most suitable structure for your family office.
For the SFO scheme, you’ll need to establish both an SFO (management company) and an SFOV (investment holding vehicle).
Register your entities with the Companies Commission of Malaysia, paying the appropriate registration fees based on your nominal share capital.
Ensure your SFOV is registered with the Securities Commission Malaysia.
Ensure you meet the financial requirements for the SFO scheme, including the minimum AUM of 30 million ringgit and local investment thresholds.
Establish a physical office in Pulau 1, Forest City Special Financial Zone. The office should be at least 500 square feet to meet regulatory requirements.
Hire the necessary professionals, including at least one investment professional and one director, both with minimum monthly salaries of RM 10,000.
Seek pre-registration with the SC to confirm eligibility for tax incentives under the SFO scheme.
Establish clear governance structures, decision-making processes, and operational protocols aligned with your family’s values and objectives.
Maintain ongoing compliance with regulatory requirements, tax obligations, and reporting standards to preserve eligibility for tax incentives.
Periodically review your family office’s performance, strategy, and operations, adapting to changes in regulations, market conditions, and family needs.
For a seamless setup process, it’s advisable to engage experienced professionals familiar with Malaysia’s regulatory environment and the specific requirements of the SFO scheme.
Malaysia’s introduction of the Single-Family Office Scheme represents a significant opportunity for high-net-worth families seeking efficient wealth management solutions.
Malaysia is positioning itself as a competitive jurisdiction for family wealth management with its:
The process of establishing a family office in Malaysia, while comprehensive, follows a clear structure.
It is designed to ensure that family offices serve their intended purpose of preserving, growing, and transferring wealth across generations.
The detailed requirements for financial substance, local investment, and employment create a framework that benefits both the families and the Malaysian economy.
As the scheme becomes fully operational in early 2025, interested families should begin the planning process now, engaging with the Securities Commission for pre-registration and ensuring all requirements are understood and can be met.
For high-net-worth families looking to centralize their wealth management in a tax-efficient jurisdiction with strong growth potential, Malaysia’s Single-Family Office Scheme offers a compelling proposition that merits serious consideration.