What is the FCSFZ Tax Incentive?
The Forest City Special Financial Zone (FCSFZ) Tax Incentive (For Fintech-related activities, Financial Global Business Services (GBS), and Foreign Payment System Operators) is part of a suite of tax incentives introduced by the Government on 20 September 2024 to attract businesses, financial institutions, high-net-worth individuals, and skilled talents to Pulau 1, Forest City, Johor.
This follows the Government’s announcement on 25 August 2023, designating Forest City as a Special Financial Zone (FCSFZ) to attract foreign investments, particularly in the sectors of finance, technology, and business services. The initiative aims to position Malaysia as a competitive hub for international business by leveraging its strategic location and fostering a business-friendly environment.
What is the Type of Tax Incentive Offered?
Special Tax Rate
5%
on qualifying non-IP income derived from qualifying activities (Fintech-related activities, Financial Global Business Services and Foreign Payment System Operations)
for 10 years*
*extendable for an additional 10 years, subject to compliance with applicable conditions
Eligibility Criteria
To be eligible to apply for FCSFZ Tax Incentive (For Fintech Related Activities, Financial Global Business Services and Foreign Payment System Operator), the applicant must be a company which:
is incorporated under the Companies Act 2016/Companies Act 1965 and resident in Malaysia
has a minimum paid up capital of RM50,000.00
is proposing to carry on the qualifying activity in Pulau 1 Forest City
has not issued any sales invoice for the qualifying activity in Malaysia prior to the date of submission of the tax incentive application, or has sixty per cent direct or indirect Malaysian equity ownership and has not issued any sales invoice for the qualifying activity in Malaysia more than twelve months prior to the date of submission of the tax incentive application
is not granted any tax incentive by the Government of Malaysia in relation to the qualifying activity
Which Activities Qualify for the Incentive?
The following activities qualify for the FCSFZ incentive and support Malaysia’s journey toward a stronger, more vibrant digital-financial ecosystem. For full details and definitions, please refer to the guideline.
Fintech
Integration of technology into offerings by financial services companies to improve their use and delivery to consumers across areas such as Regulatory Fintech, Insurtech, Islamic Fintech etc.
Financial GBS
Centralised, multifunctional service delivery models within large organisations under financial sector/services, covering mid-office and back-office functions such as accounting, payroll, treasury, tax, and financial reporting under one umbrella.
Foreign Payment System Operator
Foreign-owned payment system operator (PSO) approved under the Financial Services Act (FSA) 2013 or Islamic Financial Services Act (IFSA) 2013 to process, clear, and settle payment transactions.
What are the Promoted Technology Enablers?
Companies must utilise one or more of the promoted technology enablers listed below in the provision of services for the above qualifying activities under the FCSFZ tax incentive.
Artificial Intelligence (AI) or Big Data Analytics (BDA)
Internet of Things (IoT)
Cybersecurity
Cloud
Blockchain
Creative Media Technology Including Extended Reality (XR) or Mixed Reality (MR)
Robotics or Automation
Advanced Network Connectivity or Telecommunication Technology
Application Process
STEP 1
Application Submission
- The applicant must complete the application form and submit to taxincentiveapp.md@mdec.com.my
- The applicant is required to provide all compulsory documents as listed in the application form and pay a processing fee of RM2,700.00 (inclusive of SST) before submission. Please note that the processing fee is non-refundable.
- Applications must be completed and submitted with payment within 6 months from the registration date. After this period, the application will be closed automatically, and no extensions are allowed.
- Applicants who still wish to proceed after closure will need to submit a new application.
STEP 2
Application Acceptance
- An acknowledgment receipt with the assignment of a Business Analyst will be sent to the applicant's registered e-mail upon submission of the application.
- The application will be reviewed for a preliminary check on the applicant’s eligibility for FCSFZ tax incentive.
- Application with unsuccessful preliminary check will be rejected.
- Applicants who still wish to proceed after the rejection will need to submit a new application.
STEP 3
Application Evaluation & Assessment
- At this stage, the applicant is to provide additional information and documents and/or present the proposed activities to the Business Analyst to support the application, if required.
- The application review will be completed by Business Analyst and deliberated by relevant stakeholder(s) within 21 working days from date of the complete application submission is received.
STEP 4
Application Deliberation
- The application will be presented to the Approving Committee for consideration and approval.
- Upon decision, the decision letter will be issued by Malaysian Investment Development Authority (MIDA) to the company.
- If rejected, the applicant may submit a new application, subject to fulfilling all eligibility criteria and requirements.
Resources
Announcement
- Announcement on the Forest City Special Financial Zone (FCSFZ) Tax Incentive (For Fintech Related Activities, Financial Global Business Services and Foreign Payment System Operator)
Accelerate your financial and digital innovation with exclusive incentives in Forest City, Johor.
Frequently Asked Questions
Does the company need to be an MD or MSC Malaysia Status company to be eligible for this tax incentive?
What are the activities that do not qualify for this tax incentive?
Can a company add new qualifying activities during the incentive period?
Is there additional requirement for companies with group annual consolidated revenue of EUR 750 million or more?
How does the company report on its compliance of the tax incentive conditions?