Zero tax rate proposed for moving to $100 billion ‘timber city’

Malaysia is proposing zero percent tax rates for family offices in the controversial Forest City megaproject, a government official said.

Malaysia’s second finance minister, Amir Hamzah Azizan, said the move “is aimed at attracting regional and Malaysian families to manage their family wealth from Malaysia,” as reported by Bloomberg.

Azizan added that the program will be the first of its kind in the Southeast Asian country and is expected to be operational by the first quarter of 2025.

Bloomberg also reported that the Malaysian government is offering a preferential corporate tax rate of between zero and 5%, as well as a 15% personal income tax rate for knowledge workers and Malaysians working in Forest City.

Newsweek contacted the Malaysian Ministry of Finance for comment via email outside normal business hours.

What is Forest City?

Forest City is a large-scale development project located in Johor, near the southern tip of the country, close to Singapore. Launched in 2016 by Chinese real estate giant Country Garden as part of China’s Belt and Road Initiative, the $100 billion megaproject aimed to create an eco-friendly urban centre spread across four artificial islands, with ambitious plans to house 700,000 residents.

However, by 2023, only a fraction of the development had been completed and less than 1% of the planned population, around 9,000 people, lived there.

The project was initially aimed at Chinese buyers looking for second homes or investment properties. However, policy changes in China, such as the introduction of strict capital controls in 2017 limiting the amount of money individuals could transfer abroad, have had a significant impact on sales. In addition, former Malaysian Prime Minister Mahathir Mohamad voiced strong opposition to the project, arguing that it was aimed primarily at foreigners rather than Malaysians. In 2018, he restricted visas for Chinese buyers.

Malaysian Megaprojects

Separately, plans are being drawn up for a 582-acre mixed-use development of Malaysian smart city – Discovery City – which is set to be a new neighbourhood within Ibrahim Technopolis, a planned 7,290-acre township in Johor.

The designer behind the project said the city’s design will focus on integration with the area’s natural environment, implementing sustainable architecture and smart city technologies while “minimizing environmental impact.”

It will incorporate renewable energy production and rainwater harvesting, and will also prioritise the use of locally sourced and recycled materials, Zaha Hadid Architects said.

A detailed design of the proposed city is expected in 2025.

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