Malaysia Budget 2027 Cuts SME and Individual Income Tax Rates From YA2027
From the year of assessment 2027, Malaysia lowers SME tax rates to 14% and 16%, cuts two resident individual bands by one point, raises the individual relief to RM12,000, and taxes income above RM1 million at 30%.
Malaysia will cut income tax rates for micro, small and medium enterprises (MSMEs) and for most resident individuals from the year of assessment 2027. Prime Minister and Finance Minister Anwar Ibrahim announced the changes in his Budget 2027 speech on 9 October 2026, and the Ministry of Finance's tax measures appendix sets out the detail.
SME income tax rates
The two preferential MSME bands each fall by one percentage point:
| Chargeable income | Current rate | From YA2027 |
|---|---|---|
| First RM150,000 | 15% | 14% |
| RM150,001 to RM600,000 | 17% | 16% |
| Above RM600,000 | 24% | 24% |
The government estimates that about 300,000 MSMEs will save up to RM6,000 each. The appendix describes MSMEs as companies with ordinary share capital of RM2.5 million or less, or limited liability partnerships with capital contributions of RM2.5 million or less, and annual sales of not more than RM50 million.
Other company measures
The appendix includes several smaller changes for companies:
- From YA2027, a small value asset of up to RM3,000 (currently RM2,000) qualifies for a full capital allowance claim. Companies other than MSMEs can claim up to RM30,000 a year on such assets, up from RM20,000; MSMEs have no annual cap.
- Under the accelerated capital allowance, qualifying spending on plant and machinery from local manufacturers, ICT equipment and software, and customized software development can still be claimed in full within two years. The allowance, due to end on 31 December 2026, now covers spending from 1 January 2027 to 31 December 2030.
- Stamp duty on foreign currency loan or financing agreements from banks in Malaysia, currently 0.5% of the amount, is capped at RM2,000 for loans up to RM100 million and RM5,000 above that, for agreements signed from 1 January 2027.
- Manufacturers already buy machinery, spare parts, and equipment free of sales tax when importing directly or buying from a local manufacturer. From 1 January 2027, local traders and distributors that pay sales tax on these goods can claim a refund when they supply them to manufacturers.
- Opening a savings or current account will be fully exempt from stamp duty from 1 January 2027. For peer-to-peer financing between MSMEs and investors, the full stamp duty exemption that ends on 31 December 2026 is replaced by a RM10 cap until 31 December 2030.
Individual income tax rates
From YA2027, the resident schedule is restructured. The relief for individuals and dependent relatives, unchanged since 2010, rises from RM9,000 to RM12,000.
| Chargeable income | Current rate | From YA2027 |
|---|---|---|
| RM70,001 to RM100,000 | 19% | 18% |
| RM100,001 to RM150,000 | 25% | 24% |
| RM150,001 to RM400,000 | 25% | 25% |
| RM600,001 to RM1,000,000 | 28% | 28% |
| RM1,000,001 to RM2,000,000 | 28% | 30% |
| Above RM2,000,000 | 30% | 30% |
Bands below RM70,000 and the RM400,001 to RM600,000 band are unchanged. The top band now starts at RM1 million instead of RM2 million, so income between the two is taxed at 30% instead of 28%.
The government estimates about 5 million taxpayers will gain up to RM1,600 in disposable income. The resident rates apply to foreign employees who qualify as Malaysian tax residents.
Changes to individual reliefs
Several reliefs are broadened from YA2027, within their existing limits:
- Medical treatment relief is renamed health and well-being, keeps its RM10,000 limit, and now covers postnatal care from a confinement center or qualified individual up to RM3,000, and absorbs the breastfeeding equipment relief.
- Relief for parents and grandparents, limited to RM8,000, covers all care expenses at home, day care, or residential care, not only medical care, and no longer needs verification from a registered medical practitioner.
- Education and skills training fees relief, limited to RM7,000, covers recognized courses in any field from certificate to doctorate. It includes up to RM3,000 for technical and vocational courses for the taxpayer or spouse, and up to RM2,000 for non-work courses or for children's classes and tuition in STEM, arts, languages, and religion.
- Lifestyle relief, limited to RM2,500, now covers AI software subscriptions and pet care: adoption from registered shelters, and vaccination, spaying, and neutering by registered veterinarians.
- Sports relief, limited to RM1,000, covers sports shoes up to RM300.
- Tourism relief of up to RM1,000 on entrance fees is extended to YA2027.
These are Budget proposals. Their implementation remains subject to the relevant legislation and government orders, with effective dates varying by measure.
Emerhub handles corporate tax filing, accounting, and payroll for foreign-owned companies in Malaysia. Talk to our Malaysia team about tax and accounting services.
Sources: Budget 2027 speech, paragraphs 29 to 31 (pages 12 to 14) and paragraphs 127 to 128 (pages 59 to 61) and Budget 2027 tax measures, Appendices 1 to 8, 11, 12, 18, 19, 21, 28 and 33 (Ministry of Finance).
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