The benefits of establishing a family office scheme in Malaysia
V Venkatachalam
by V Venkatachalam
Family offices (FOs) are becoming increasingly popular, especially in the investment circles. They can either be structured with one principal, known as single family office, or multiple principals, which is known as multi-family office.
Family offices are private wealth management advisories that serve ultra-high-net-worth (UHNW) investors. They differ from traditional wealth management shops as they offer a total outsourced solution to managing the financial and investment concerns of an affluent individual or family.
The family office is the concept of formulating a family constitution aligned with the family’s core values, as well as providing a guide on how to run a family business which consistently aligns with those family values.
Five key reasons to start a family office in Malaysia
Each family deciding to start a family office has their own unique reasons which might be different from those of another family. Therefore, we have identified five key reasons to start a family office:
1. Tailor-made service:
A family office provides family wealth planning strategies that are sustainable for generations, including advice from professionals such as certified financial planners, lawyers, accountants, tax agents, fund managers, and trust specialists.
2. Family governance:
A family office provides governance which looks into the complexity of a family’s wealth with transparency, while reducing the risk of conflicts in the future. Advisory and wealth management for the family members are both under the same entity to ensure confidentiality.
3. Alignment of interests:
A family office provides better alignment of interests between the financial advisor and the family.
4. Business succession planning:
A family office supports the smooth structuring of family business succession – transitioning the business management role to the successor of the next generation, while preserving family and business harmony.
5. Family financial mentoring:
A family office acts as a financial mentor. The main services provided include setting and monitoring financial goals, family cash flow budgeting, investment planning, tax planning, insurance planning, retirement planning, and estate planning.
On the next page you can see a summary of Malaysia's Forest City Family Office Incentive:
Malaysia's Forest City Family Office Incentive
PRE-APPROVAL
REQUIRED
FIHV and QAHE structural requirement
A new investment holding company incorporated in Malaysia.
Location
Establish and operate a registered office in Pulau 1, Forest City SFZ.
Incentive and duration
0% concessionary tax rate for 10 + years.
Minimum AUM
≥ MYR 30 million (≥ MYR 50 million for an additional 10 years), with a minimum local investment in eligible and promoted investments of at least 10% of AUM or MYR 10 million, whichever is lower (higher for additional 10 years).
Annual operating expenditure
≥ MYR 500,000 spent locally (≥ MYR 650,000 for an additional 10 years).The single family office vehicle (SFOV) must set up an office in FC SFZ with a minimum 500 square feet.(Note: Local spending may include, but is not limited to staff, rent, management fees, and fees to local service providers in Malaysia.)
Number of full-time qualified employees in the SFOV
Employees: a minimum of 2 full-time employees (FTE) and 4 for an additional 10 years where:
At least 1 director/FTE, and at least 1 FTE who is an investment professional (IP).
2. The director/FTE and IP shall each receive a salary of at least MYR 10,000 per month.
3. The director/FTEand IP must be Malaysian tax residents throughout the incentive period.
4. The IP must meet the following criteria:
a.
Have relevant academic qualifications or relevant work experience in a domestic or foreign bank, finance or capital market products & services.
5. The FTEs will subject to a 15% personal income tax (PIT) rate for qualified FTEs in FC SFZ.
Service targets of the SFOV
Solely for the benefit of its related single family office vehicle owned by the same family members.
Family office manages a wide range of solutions for its family
Wealth management, including marketable securities, bonds, unit trustlegal, bookkeeping, and tax planning.Insurance and risk management.Concierge and family services.Governance, education, and succession planning.Philanthropy.Real estate holdings are excluded from the proposed incentive for the time being (e.g. housing, retail, commercial, lands and building).
Qualifying investment transactions
No restrictions (subject to further announcement).
Limit on number of tax-exempt FIHVs or QAHEs
No restrictions (subject to further announcement) on tax-exempt FIHVs and QAHEs.
AUM = Asset Under ManagementFIHV = Family-owned Investment Holding VehicleQAHE = Qualifying Asset Holding EntitySFOV = Single Family Office Vehicle
Contact for Assistance
V VenkatachalamT: +607 224 11 17
V Venkatachalam is a Fellow of the Association of Chartered Certified Accountants (FCCA), member of the Malaysian Institute of Accountants (MIA), a Fellow of the Chartered Tax Institute of Malaysia (FCTIM), a Chartered Member of the Institute of Internal Auditors Malaysia. (CMIIA). He has been in practice for more than 30 years and currently pursuing his doctorate.Contact V.
Ahmad Abdullah & Goh, Chartered Accountants in Malaysia, is a fully diversified practice providing accounting, auditing, taxation, corporate secretarial services, liquidation, winding up, receivership, employment pass for expatriates and business consulting services. The Firm was involved in several privatization projects of the Malaysian Government and regularly carries out audit of statutory bodies on behalf of the Auditor General Malaysia.
GGI member firmAhmad Abdullah & GohJohor Bahru, Kuala Lumpur, Penang, Labuan, MalaysiaT: +60 3 2202 0885
Auditing & Accounting, Tax, Advisory
