KUALA LUMPUR: The incentives announced for the Forest City Special Financial Zone (Forest City SFZ) in Johor, including tax breaks and benefits for family offices, highlight a strategic vision to attract global capital and bolster Johor's position as a financial hub, according to Knight Frank Malaysia.

"We see this as a pivotal moment for Johor's growth. We fully support these efforts," the firm said.

Situated in Iskandar Puteri, Forest City spans four man-made islands covering 30 square kilometers. It is a US$100 billion development by Country Garden Pacificview Sdn Bhd, a joint venture between Country Garden Group and Malaysia-government-backed Esplanade Danga 88 Sdn Bhd.

On August 23, 2024, Prime Minister Datuk Seri Anwar Ibrahim announced the establishment of an SFZ within Forest City.

Last week, Malaysia's Second Finance Minister Datuk Seri Amir Hamzah unveiled a package of targeted incentives for specific sectors in the Forest City SFZ.

Forest City benefits from its status as a duty-free island within the SFZ. The island—Pulau Satu—will focus on financial services, while the mainland will prioritise logistics, global service hubs, and relocation services.

Additionally, the proposed Kuala Lumpur-Singapore high-speed rail, currently under discussion, is expected to pass through Forest City.

Key incentives include corporate tax rates ranging from zero per cent to 5.0 per cent, a 15 per cent individual income tax rate, a zero per cent tax rate for family offices, a 5.0 per cent tax rate for global financial services, and the expansion of foreign banks with foreign exchange flexibility within the SFZ.

These measures align with broader initiatives under the Johor Singapore Special Economic Zone (JS-SEZ) and support Johor's goal to achieve developed state status by 2030.

UOB noted that the incentives aim to spark initial interest and cultivate Forest City SFZ's potential as a global financial hub.

The move is supportive of a wider scope of incentives and initiatives for the JS-SEZ and to realise Johor's goal to become a developed state by 2030, it said in a note.

UOB said the JS-SEZ would be closely linked with the Forest City SFZ to bring more investment opportunities, job creation, and development projects to Johor.

"Key incentives that span 20 years (10 + 10 years) are conditional on operations expanding by at least 30 per cent, covering operating expenses, number of key personnel, number of knowledge workers, and ESG elements. As such, the outcome-driven incentives are designed to attract new investments and reward expansionary activities that invest and grow the skilled workforce as well as enhance sustainability efforts," the firm said in a note today.

UOB said that these incentives are comparatively more attractive as most incentives are generally for five to 10 years.

For some qualifying sectors (logistics), the investment tax allowance offered is 100 per cent to offset against the statutory income (versus the general 60 per cent).

UOB said next to watch will be Budget 2025 that will be tabled next month (Oct 18) and the final JS-SEZ agreement that will cover broader incentives for other non-financial sectors (by November).

Meanwhile, RHB Research said the incentive packages for Forest City SFZ are significant and should have a positive spillover effect on Iskandar Malaysia in the longer run, with higher demand for property, commercial, and retail activities.

It said that if the ecosystem (regulations and infrastructure) is well established, the push for family offices makes sense as Forest City is situated next to Singapore, which has been a hub for family offices in the region.

"Incentives for other financial institutions and logistics sectors should also attract investments into Forest City, creating more job opportunities," it said.