Challenge for Forest City to woo family offices from S'pore: Experts

Zero per cent tax rate unlikely to draw the rich away from established hubs, they say

- Angela Tan

Malaysia's move to apply a 0 per cent tax rate for family offices in Forest City, Johor, will attract wealth management firms but is unlikely to draw the rich away from established hubs like Singapore and Hong Kong, say experts.

Malaysia is just beginning to establish its presence in the family office sector whereas Singapore is a regional powerhouse, with 1,650 single family offices as at Aug 31, while Hong Kong had an estimated 2,700 at the end of 2023, they said.

The two cities host 15 per cent of the world's single family offices, entities that manage the wealth of the super rich. Each city manages roughly US$1.3 trillion (S$1.7 trillion) in offshore assets, according to a McKinsey study.

Ms Chee Pei Pei, Deloitte private tax and legal and family enterprise leader, noted that the tax incentives announced by Malaysia on Sept 20 are comparable with those in Singapore, and are a first step towards encouraging the growth of family offices there.

But she added that it takes more than a 0 per cent tax rate to attract investors to a country, noting:

"There are many factors to consider when choosing a location for a family office.

"Singapore stands out... due to its strong rule of law, robust and predictable regulatory system, a well-developed ecosystem of wealth managers and professional service providers, as well as its safe and family-friendly environment.

"Additionally, Singapore offers world-class education and health-care systems."

Mr Pascal Wengi, Avaloq's managing director for the Asia-Pacific, Middle East and Africa, said: "You can't short-cut these with zero tax."

Family offices here are generally subject to the prevailing corporate tax rate of 17 per cent on fund management fees derived from providing client services.