Transformation of Pulau 1, Forest City, Johor to a Duty-Free Island: A New Economic Frontier
During the recent parliamentary session in July 2024, the Customs (Amendment) Bill 2024, Excise (Amendment) Bill 2024, Free Zones (Amendment) Bill 2024, Sales Tax (Amendment) Bill 2024 and Services Tax (Amendment) Bill 2024 was passed to designate Pulau 1 as a duty-free island similar to Langkawi, Labuan and Pangkor islands. The Bills have yet to be gazetted and the date of Royal Assent has yet to be determined. However, it is anticipated that the implementation of the Bills will promote the trade and tourism aspects of the Iskandar region as less stringent restrictions will be imposed on tax permits and applications for the sale of duty-free goods.[1]
Forest City, covering 14 square kilometres of reclaimed land on four artificial islands near the border of Malaysia and Singapore, is a mega project developed by Country Garden Pacificview Sdn. Bhd., a joint venture between Country Garden Pacificview Sdn.Bhd. and Esplanade Danga 88 Sdn. Bhd.
Pulau 1, a 700-acre artificial island, is the most developed out of the four planned islands. It currently comprises a sales gallery, sales spaces, Marina Hotel, commercial units, duty-free shops, an international school, a small office/home office tower offering co-working space, waterpark, beach bar, and a beach activity area.[2]
As a duty-free island, Pulau 1 is set to offer duty free products, like liquor, chocolate, cosmetics and perfume, provided that the necessary eligibility criterias have been met. Deputy Finance Minister Lim Hui Ying proposed that the visitors who leave the island for Malaysia must submit receipts, invoices or documents of their purchases to the Royal Malaysia Customs Department, proving that the visitor has been in Pulau 1 for no less than 40 hours to ensure transparency and law enforcement in Pulau 1.[3]
The Johor government has also proposed for the Forest City Special Financial Zone to be included within the Johor-Singapore Special Economic Zone to boost the economy in Iskandar Malaysia. The incentives proposed, among others, include granting knowledge workers a 15% flat income tax rate, and companies and individuals will be offered special-rate tax incentives and expedited immigration lanes to facilitate the entry of experts from aboard.[4] The incentives shall result in lower cost of doing business and to attract talent and international businesses into the zone. The said incentives for Forest City Special Financial Zone, as stated by Johor Menteri Besar Datuk Onn Hafiz Ghazi, is targeted to be finalized in August before the signing of the Johor-Singapore Special Economic Zone agreement between Malaysia and Singapore.[5]
Forest City has additionally applied for Malaysia Digital status recognized by the Malaysian Digital Economy Corporation to attract hi-tech sector investors where enterprises related to digital centres, smart technology and green intelligence fields such as big data analysis, artificial intelligence and financial technology will enjoy income tax exemptions up to 10 years.[6]
There have also been on-going discussions for infrastructure projects, including the Kuala Lumpur-Singapore High-Speed Rail, and the Johor-Singapore Special Economic Zone, embarked for the area to increase cross-border economic connectedness as Forest City is at the most ideal location which had a significant influence in pioneering these new measures on tourism and economic activity.[7]
The enactment of the Bills and the continuous development at Forest City are poised to usher in a new era of economic vitality in the Johor region. This transformation provides job opportunities and represents a gateway to a thriving economy and a vibrant business landscape. As the development unfolds, it is expected to open doors to a myriad of work opportunities, attracting a diverse pool of talent and fostering innovation and growth for Johor.
If you have any questions or require any additional information, please contact Lee Lily @ Lee Eng Cher, or the Zaid Ibrahim & Co (in association with KPMG Law) partner you usually deal with. This article was prepared with the assistance of Lee Jean, Associate at Zaid Ibrahim & Co (in association with KPMG Law).
[1] ‘Pulau 1 in Johor’s Forest City to be duty-free island’ (Malay Mail,18 July 2024) <https://www.malaymail.com/news/malaysia/2024/07/18/pulau-1-in-johors-forest-city-to-be-duty-free-island/144135>.
[2] Ben Tan, ‘What is Pulau Satu in Johor’s Forest City, Malaysia’s next duty-free island?’ (Malay Mail, 31 July 2024) <https://www.malaymail.com/news/malaysia/2024/07/31/what-is-pulau-satu-in-johors-forest-city-malaysias-next-duty-free-island/145199>.
[3] 'Pulau 1 in Johor’s Forest City to be duty-free island’ (Malay Mail,18 July 2024) <https://www.malaymail.com/news/malaysia/2024/07/18/pulau-1-in-johors-forest-city-to-be-duty-free-island/144135>.
[4] Jassmine Shadiqe, ‘Forest City granted special financial zone status to attract foreign investment, PM reveals’ (New Straits Times, 25August 2023) <https://www.nst.com.my/news/nation/2023/08/947406/forest-city-granted-special-financial-zone-status-attract-foreign>; Official Portal of Ministry of Finance, ‘Special Financial Zone to be created in Forest City –PM Anwar’ <https://www.mof.gov.my/portal/en/news/press-citations/special-financial-zone-to-be-created-in-forest-city-pm-anwar>.
[5] Jassmine Shadiqe, ‘Forest City’s SFZ to be integrated into Johor-Singapore SEZ’ (New Straits Times, 12 August 2023) <https://www.nst.com.my/news/nation/2024/08/1090368/forest-citys-sfz-be-integrated-johor-singapore-sez>.
[6] Malaysia Digital Economy Corporation, ‘Announcement on the official launch of Malaysia Digital (MD) Tax Incentive’ <https://mdec.my/announcement/md-tax-incentive>; ‘Forest City expansion fuels growth’ (The Star, 5 August 2024) <https://www.thestar.com.my/news/nation/2024/08/05/forest-city-expansion-fuels-growth>.
[7] ‘Immediate returns on investment, 5 Highlights of Forest City Prime Commercial Units with Lease’ (Forest City, 2 August 2024) <https://forestcitycgpv.com/news/245-immediate-returns-on-investment-5-highlights-of-forest-city-prime-commercial-units-with-lease>; ‘KL-S’pore high speed rail to boost sentiment on the property sector’ (The Star, 29 January 2024) <https://www.thestar.com.my/business/business-news/2024/01/29/kl-spore-high-speed-rail-to-boost-sentiment-on-the-property-sector>.