As 2025 starts off with major geopolitical changes in the world and Malaysia takes the Chair for ASEAN, there are exciting developments in Malaysia that will impact businesses and FDI. We would like to update our clients on the major legislative updates to look out for particularly in the tax and energy space, as well as new opportunities in the state of Johor through the Johor-Singapore Special Economic Zone, a recap on the National Semiconductor Strategy and the focus on private equity.

Introduction

Last year, the government alerted the nation to the pressing need to review over 3,000 outdated laws. In response to this, Budget 2025 highlighted the Government’s goal of reviewing outdated laws, including commercial laws like Contracts Act 1950 and Legal Aid Act 1971.

Starting 1 January 2025, social media, and internet messaging service providers with at least 8 million users are required to apply for the Applications Service Provider Class Licence under the Communication and Multimedia Act 1998. On the same date, laundry premises area and workplace buildings now are considered as non-smoking areas under Smoking Products Control Act for Public Health 2024, and the Self-Employment Social Security Scheme (“SKSPS”) is now mandatory for licensed hawkers and traders by virtue of the Self-Employment Social Security (Rates of Contribution for Hawker or Trader) Regulations 2024. Malaysia will witness the implementation of a minimum wage of RM1,700 this year with enforcement taking place in two phases on 1 February 2025 and 1 August 2025, pursuant to the Minimum Wages Order 2024. The enforcement of Personal Data Protection (Amendment) Act 2024 will take place in three phases, beginning on 1 January 2025, with subsequent phases on 1 April 2025 and 1 June 2025.

The Government’s intent on regulatory reform continues with plans to amend the Child Act 2001 which is set to impose heavier penalties and revising the Land Acquisition Act 1960. The Ministry of Economy is planning to enact the Anti-Rent Seeking Act, while the Ministry of Transport aims to amend three legislation such as the Road Transport Act 1987, Land Public Transport Act 2010, and Commercial Vehicle Licensing Board Act 1987 this year.

The Ministry of Domestic Trade and Cost of Living is still reviewing whether to introduce the Lemon law or propose amendments to the existing legislation concerning defective vehicles by March 2025, while the Ministry of Natural Resources and Environmental Sustainability is actively working on improving the Strata Titles Act 1985.

This year, Parliament is set to table of Freedom of Information Bill, Government Procurement Bill, National Climate Change Bill, and the bill on compulsory education. Similarly, the Gig Workers Economy Bill is set to be tabled not before an extensive stakeholder consultation.

In addition, Government agencies such as Social Security Organisation (SOCSO) is set on amending the Employees’ Social Security Act 1969 and Employment Insurance System Act 2017. Furthermore, the National Cyber Security Agency (NACSA) is currently drafting a new Cybercrime Bill.

 

Johor-Singapore Special Economic Zone (JS-SEZ)

The much talked about new JS-SEZ is aimed at strengthening economic ties and promoting regional growth between Malaysia and Singapore. After many rounds of discussion and planning Singapore and Malaysia exchanged an agreement moving plans with regard to the JS-SEZ forward on 7 January 2025 at the 11th Malaysia-Singapore Leaders’ Retreat in Putrajaya.

Key points about JS-SEZ

  • Strategic Location

The JS-SEZ covers areas within Iskandar Malaysia, including Johor Bahru City Centre, Forest City, and the Pengerang Integrated Petroleum Complex, covering an area approximately five times larger than Singapore. An area this large allows both countries to encourage diverse economic activities which will benefit the economies of both Malaysia and Singapore through the state of Johor. This strategic location allows businesses to access Singapore’s world-class financial infrastructure and global networks while benefiting from Johor’s lower operating costs and abundant land.

  • Priority Sectors

The JS-SEZ is expected to focus on sectors such as electronics, financial services, business-related services, healthcare, and renewable energy.

  • Cross-Border Collaboration

This collaboration is expected to create 20,000 skilled jobs within the first five years, enhancing the talent pool in the region. Both countries are also looking to attract high value investments from third parties globally.

  • Connectivity Improvements

Plans include the development of a high-speed rail, the Rapid Transit System (RTS) Link between Johor Bahru and Singapore which is expected to be operational by 1st quarter of 2027 and other infrastructure developments (including a proposed JB LRT) to be led by the private sector, to facilitate seamless travel and strengthen economic ties.

  • Economic Impact

The JS-SEZ is poised to catapult Johor into a prime destination for foreign direct investment (FDI). In 2023, Johor secured RM70.6 billion worth of foreign investments across various sectors, with Singapore being the state’s second-largest foreign investor.

JS-SEZ Flagship Areas

The JS-SEZ will be made up of 9 flagship areas with respective industries earmarked for the respective areas as follows:-

JS-SEZ Special Tax Incentives

Key incentives already announced by the Ministry of Finance and the Government of Johore for the JS-SEZ include:

  • Special Corporate Tax Rate

Companies investing in qualifying sectors such as artificial intelligence (AI), quantum computing, medical devices, aerospace manufacturing, and global services hubs can benefit from a special tax rate of 5% for up to 15 years.

  • Flagship Development Focus

Additional tailor-made incentives are allocated to businesses operating in certain flagship areas within the JS-SEZ.

  • Special Tax Rate for Knowledge Workers

Eligible knowledge workers in the JS-SEZ will enjoy a special income tax rate of 15% for 10 years.

  • Entertainment Duty Reductions

Starting 1 January, 2025, entertainment duty reductions aim to boost tourism and leisure- related investments.

Other Initiatives

Prior to the official exchange in January 2025, both countries had undertaken early initiatives based on business feedback to build towards this JS-SEZ which included the following:

  • Passport free QR code clearance at Singapore’s land checkpoints with Malaysia and the flow of traffic on the Causeway has eased somewhat with faster processing;
  • Establishment of Invest Malaysia Facilitation Centre- Johor (IMFC-J), a one-stop shop which will streamline and expedite the process for companies looking to establish in or expand to the JS-SEZ;
  • Partnerships to strengthen cooperation in technical and vocational education and training (TVET) initiatives to meet industry demands. This includes cooperation between Singapore Polytechnic and the Federation of Malaysian Manufacturers (FMM), and Singapore’s ITE Education Services (ITEES) and the Johor Skills Development Centre (JSDC), as well as the Cooperation Note on Talent Development between Republic Polytechnic and the Johor Talent Development Council (JTDC); and
  • Procedures at customs for land intermodal transshipments were streamlined and as of 1 January 2025, traders only need to apply for a single transshipment permit with Singapore Customs for land intermodal transshipments, instead of two separate permits which helps businesses save costs and improve efficiency.

The establishment of the JS-SEZ presents significant opportunities for businesses seeking to expand in Southeast Asia and this initiative is expected to transform the State of Johore’s economic landscape, with the influx of high- impact investments from various fields.

 

Single Family Office Scheme in Forest City Special Financial Zone

For the first time in Malaysia, there will be new family office tax incentives under the Single Family Office Scheme, designed to attract foreign and Malaysian families to manage their wealth in Forest City, Johor Bahru.

These incentives were announced on 20 September 2024 as part of the Forest City Special Financial Zone incentives, for business located in the island of Forest City Pulau 1. This was followed by an FAQ issued by the Securities Commission of Malaysia on 23 September 2024 setting out key features, eligibility and ongoing requirements of the Single Family Office (SFO) and Single Family Office Vehicle (SFOV) structure required to be set up in order to enjoy such incentives.

Key features of the Forest City Single Family Office Scheme are:

  • Structure must comprise an SFO, being the management company established to exclusively to manage the assets, investments and long- term interests of a single family, and an SFOV, established solely for the purpose of holding such assets, investments and long-term interests.
  • SFOV enjoys 0% concessionary tax rate on income generated by eligible investments from the SFOV for a period of 10 years, which may be extended to another 10 years if certain criteria are met.
  • In order to enjoy such 0% concessionary tax rate for the first 10 years, some of the requirements are:

- Both the SFO and SFOV must be established in Malaysia and operate at Pulau 1 of Forest City in Johor Bahru, with a minimum office space of 500 square feet each;

- the SFO must be a related company to the SFOV;

- the SFO must employ at least 1 investment professional with a minimum monthly salary of RM10,000;

- the SFOV must hold assets under management (AUM) of at least

RM30 million;

- the SFOV must meet minimum local investment of at least 10% of AUM or RM10 million whichever is lower;

- the SFOV must incur an annual operating expenditure of a minimum of RM500,000 locally;

- the SFOV must employ a minimum of 2 full-time employees of whom at least 1 is an investment professional, and each must receive a minimum monthly salary of RM10,000.

  • There is one-off stamp duty exemption on the transfer of properties (except for real estate properties) into the SFOV at its initial establishment.
  • Foreign exchange flexibilities on the investments to be injected into the SFOV.

The Single Family Office Scheme is timely in light of the continued growth in family wealth management and legacy planning for families, together with a trust or foundation structure. It is coordinated by the Securities Commission Malaysia and detailed conditions are expected by the first quarter of 2025.

 

To read the whole article, go to the original article [here].