The Johor-Singapore Special Economic Zone (JSS) has been launched with a range of attractive tax incentives aimed at drawing significant foreign investment and stimulating economic growth in Malaysia.

Massive tax benefits are a part of the scheme, with a special corporate tax rate of 5% for 15 years for firms in manufacturing and services, as well as a 15% income tax rate for eligible knowledge workers for 10 years. The initiative is projected to generate an additional US$26 billion annually for Malaysia's economy by 2030, leveraging the strengths of both Johor and Singapore. The JSS region is nearly twice the size of Shenzhen, and Malaysian officials hope to replicate its successful economic model.

For businesses in Singapore, this development presents both opportunities and challenges. While tax revenues from businesses operating in the JSS will primarily go to Malaysia, the lower tax rates in JSS could incentivize companies to relocate or expand their operations in the economic zone, potentially leading to a shift in investment away from Singapore. Sovereignty over the JSS lies with Malaysia, although its proximity to Singapore suggests a collaborative approach.

Although Malaysia would primarily receive tax revenues from businesses operating in the zone, Singapore has its own interests in maintaining a strong economic relationship with Malaysia, as cross-border investments and collaborations can enhance its regional standing and attract businesses that may also benefit from Singapore's infrastructure and market access.

Source: South China Morning Post (SCMP)