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Single Family Office In Malaysia

  • Writer: Aimi Nadhirah Ahmad Zulkifli
    Aimi Nadhirah Ahmad Zulkifli
  • Apr 1, 2024
  • 3 min read

In recent years, Malaysia has seen a growing trend among ultra-high net worth (“UHNW”) families to establish Single-Family Offices. These entities are dedicated to managing the financial and personal affairs of a single family, ensuring that their wealth is preserved and grown across generations. 


Defining a Single-Family Office (“SFO”) 


A Single-Family Office is a corporate vehicle and a private entity, wholly owned or controlled by a single UHNW family. Unlike multi-family offices, SFO focuses exclusively on the financial and personal affairs of one UHNW family, often representing multiple generations and branches of the same family. The key functions of an SFO include wealth management, legal and bookkeeping services, family governance, education, and philanthropy management.[1]


Regulatory Environment 


In Malaysia, the establishment of an SFO triggers the requirement to obtain fund management license under the Capital Markets and Services Act 2007 (“CMSA”). However, the SFO may be exempted from obtaining the said license under the CMSA if the SFO can establish that the management services provided by the said SFO is exclusively for the advantage of a single-family office vehicle (“SFOV”) which is its related corporation.[2] The Securities Commission Malaysia (“SC”) has come out with the diagram below for an illustration of the relationship between a SFO and a SFOV.[3] 


Notwithstanding the exemption, the SC may still impose terms and conditions on the SFO pursuant to Section 58 of the CMSA.[4] Hence, it is advisable for a person intending to set up or operate an SFO to seek legal advice in relation to the licensing obligations under the CMSA. 


Tax Incentives and Benefits 


The SC oversees the regulatory requirements and has introduced a Single-Family Office Incentive Scheme to encourage the setup of SFO under this scheme.[5] These include: 


  1. 0% Concessionary Tax Rate: Eligible SFOs can enjoy a 0% tax rate on income generated by eligible investments for up to 20 years (10 years initial period + 10 years extension). 


  1. Stamp Duty Exemption: A one-off stamp duty exemption for asset transfers. 

  2. Income Tax Rate: SFOs operating in the Forest City Special Financial Zone (“FC SFZ”) can benefit from a 15% income tax rate for qualified employees. 


Tax Incentives and Benefits 

  1. Location: Establish and operate a registered office in Pulau 1, FC SFZ. 


  1. Duration: 20 years, covering the initial period of 10 years and additional/subsequent 10 years. 


In order for the SFOV to qualify for initial period (10 years), the SFOV must fulfill the following criteria:[2] 


  1. must be a new investment holding company incorporated in Malaysia and seek pre-registration with the SC on the eligibility of the tax incentives; 


  1. management company or SFO which is a related company of SFOV to be set up and operate out of Pulau 1, FC SFZ with at least one investment professional with minimum monthly salary of RM10,000.00; 


  1. hold asset under management of at least RM30 million - meet minimum local investment in eligible and promoted investments of at least 10% of asset under management or RM10 million whichever is lower; 


  1. SFOV to spend operating expenditure (OPEX) locally a minimum of RM500,000 annually; and e. employ a minimum of two full-time employees of whom at least one is an investment professional, with minimum monthly salary of RM10,000; 


Further, for the SFOV to qualify for additional period (additional 10 years), the SFOV must fulfill the following criteria.[3]: 


  1. hold asset under management of at least RM50 million - meet minimum local investment in eligible and promoted investments of at least 10% of asset under management (AUM) or RM10 million whichever is higher; 


  1. SFOV to spend OPEX locally (30% higher than Initial Period) a minimum of RM650,000 annually; and 


  1. employ a minimum of four full-time employees. 


Advantages of Establishing an SFO 


Setting up an SFO offers numerous advantages, including: 

  1. Centralized Decision-Making: Ensures that all financial and personal decisions are made in a coordinated manner. 


  1. Tailored Financial Strategies: Provides customized financial and investment strategies tailored to the family's needs. 


  1. Enhanced Family Governance: Facilitates better family governance and succession planning. 


  1. Philanthropy Management: Manages philanthropic activities and charitable giving. 


It also provides a robust platform for managing and growing the family's wealth in an increasingly complex global environment. 


Conclusion 


The Single-Family Office Incentive Scheme in Malaysia is a game-changer for UHNW families, offering substantial tax benefits and a supportive regulatory framework. As more families recognize the advantages of setting up an SFO, Malaysia is poised to become a leading destination for family wealth management in the region. 


[2] SC Outlines Family Office Incentive Scheme dated 23 September 2024

[3] SC Outlines Family Office Incentive Scheme dated 23 September 2024


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