Malaysia Budget 2027 for SMEs: tax cuts, minimum wage and financing
Budget 2027 was tabled on 9 October 2026. Here is what it changes for a Malaysian small business, worked out in ringgit, and what to do before the year starts.
Budget 2027, tabled on 9 October 2026, proposes SME company tax of 14% on the first RM150,000 of chargeable income and 16% up to RM600,000 from YA 2027, saving up to RM6,000 a year. The minimum wage rises to RM2,000 from June 2027, but SMEs with annual sales under RM50 million are exempt.
Prime Minister Datuk Seri Anwar Ibrahim tabled Budget 2027 in the Dewan Rakyat on 9 October 2026. For a small business owner the headline is simple: lower company tax, a minimum wage rise that most SMEs won't have to apply yet, and more financing through the usual agencies. This guide covers what each measure means for your business in ringgit, based on the Ministry of Finance's official budget speech and tax measures documents.
Remember that these are proposals. Tax changes take effect only once Parliament passes the Finance Bill, and agencies will publish the eligibility rules for each fund over the coming months.
What does Budget 2027 mean for Malaysian SMEs?
The measures that touch most small businesses:
| Measure | What changes | From |
|---|---|---|
| SME company tax rate | 15% → 14% on the first RM150,000; 17% → 16% on RM150,001 to RM600,000 | YA 2027 |
| Minimum wage | RM1,700 → RM2,000 a month; SMEs with sales under RM50 million exempt | June 2027 |
| Small value assets | Per-asset limit for full capital allowance up from RM2,000 to RM3,000 | YA 2027 |
| Accelerated capital allowance | ICT equipment, software packages and local machinery: extended | 1 Jan 2027 to 31 Dec 2030 |
| Financing and guarantees | Total raised from RM50 billion to RM57 billion | 2027 |
| Personal income tax | Lower rates on RM70,001 to RM150,000; self relief up from RM9,000 to RM12,000 | YA 2027 |
| P2P financing stamp duty | Capped at RM10 per MSME agreement | 1 Jan 2027 to 31 Dec 2030 |
| Bank account stamp duty | Opening a savings or current account fully exempt | 1 Jan 2027 |
What is the new SME tax rate in Budget 2027?
Budget 2027 proposes cutting both SME bands by one percentage point from YA 2027. The top band doesn't change.
| Chargeable income | Rate up to YA 2026 | Proposed rate from YA 2027 |
|---|---|---|
| First RM150,000 | 15% | 14% |
| RM150,001 to RM600,000 | 17% | 16% |
| Above RM600,000 | 24% | 24% |
The qualifying conditions stay as they are: paid-up ordinary share capital of RM2.5 million or less (or an LLP capital contribution of RM2.5 million or less) and annual sales of no more than RM50 million, plus LHDN's conditions on foreign ownership and related companies. Our guide to corporate income tax for Malaysian SMEs explains those conditions in full.
When does YA 2027 start for my company? A company's year of assessment is the calendar year in which its financial year ends. A company with a 31 December year end gets the new rates on its profit for January to December 2027. A company with a 30 June year end gets them for its financial year from 1 July 2026 to 30 June 2027, so part of its 2026 profit benefits too.
How much will my company save from the SME tax cut?
The saving is 1% of your chargeable income up to RM600,000, so the most any company can save is RM6,000 a year. The government expects about 300,000 SMEs to benefit.
| Chargeable income | Tax at current rates | Tax at proposed rates | Saving |
|---|---|---|---|
| RM120,000 | RM18,000 | RM16,800 | RM1,200 |
| RM400,000 | RM65,000 | RM61,000 | RM4,000 |
| RM600,000 | RM99,000 | RM93,000 | RM6,000 |
| RM1,000,000 | RM195,000 | RM189,000 | RM6,000 |
Example: a Klang Valley trading company with chargeable income of RM400,000 pays 14% × RM150,000 = RM21,000 plus 16% × RM250,000 = RM40,000, a total of RM61,000. That is RM4,000 less than the RM65,000 it would pay at today's rates.
What to do about CP204. Your estimate of tax payable for YA 2027 is due 30 days before your basis period starts, which is by 1 December 2026 for a December year-end company. Ask your tax agent whether to estimate at the proposed rates. If the Finance Act ends up different, you can still revise in the 6th, 9th or 11th month.
Does the RM2,000 minimum wage apply to my SME?
The government will raise the minimum wage from RM1,700 to RM2,000 a month from June 2027. The budget speech says SMEs (PMKS) with annual sales below RM50 million are exempt, to give them room to adjust their business models.
What we don't know yet, as of 10 October 2026:
- How long the exemption lasts. The speech gives no end date.
- How it will be applied, including how annual sales will be measured. Employer groups have already asked for this. The detail will come in a new minimum wages order from the Ministry of Human Resources. Check that order before changing your payroll.
The government also plans a minimum wage of RM2,500 a month for semi-skilled jobs and graduates, described in the speech as a starting point. No date was given.
If your sales are close to RM50 million, or you're part of a group, don't assume the exemption covers you. Even if it does, your staff will compare their pay with what larger employers now pay, so it's worth working out what RM2,000 would cost you. A cash flow forecast with the new wage bill from June 2027 shows the effect month by month. Our cash flow forecast guide shows how to build one.
Pay salaries by bank transfer. From YA 2028, companies that aren't SMEs will only be able to deduct salaries paid through a financial institution or a cashless method. SMEs are exempt, but paying by transfer still gives you a clean record for LHDN and the Labour Department.
What changes for capital allowances?
Two measures make equipment cheaper after tax:
- Small value assets. You can now claim full capital allowance in one year on assets costing up to RM3,000 each, up from RM2,000, from YA 2027. SMEs still have no annual cap on these claims. For other companies the cap rises from RM20,000 to RM30,000.
- Accelerated capital allowance (ACA). The 20% initial and 40% annual allowance, which lets you write off qualifying assets in two years, is extended for spending from 1 January 2027 to 31 December 2030. It covers ICT equipment, computer software packages, plant and machinery from local manufacturers, and fees for developing customised software.
A RM2,800 laptop bought in 2027 now counts as a small value asset, so it can be claimed in full in one year. Keep the invoice. LHDN will want to see it.
Software you pay for monthly is usually treated as a running cost rather than a capital purchase. Ask your tax agent how yours is treated.
What financing is available to SMEs in Budget 2027?
Total loans and financing guarantees rise from RM50 billion to RM57 billion in 2027. The main channels:
| Channel | Amount | Who it's for |
|---|---|---|
| SJPP and CGC guarantees | Up to RM32 billion | SMEs; SJPP now covers mid-tier companies in all sectors, with a guarantee limit of up to RM50 million |
| SJPP guarantees for M&A | RM1 billion | Local companies expanding through mergers and acquisitions |
| Bank Negara Malaysia fund | Additional RM5 billion | SMEs affected by the West Asia conflict |
| BPMB export financing | RM1 billion | SMEs entering export markets |
| MATRADE | RM60 million | Building capacity to enter and diversify overseas markets |
| Microfinancing | RM6.6 billion | Including AIM RM3 billion, TEKUN RM1.3 billion, BSN RM1.7 billion, and RM150 million for Indian entrepreneurs through TEKUN and AIM |
| Geran Sejahtera MADANI | RM200 million | Equipment and training for 40,000 recipients, mainly women |
| MDEC fund | RM30 million | Helping 4,000 SMEs adopt AI and automate operations |
| NADI platform | RM142 million | Young entrepreneurs selling online |
These funds are run by the agencies and banks named, each with its own criteria. When you apply, a lender will ask for up-to-date accounts, a recent cash position and evidence that your customers pay. If your books are months behind, catch them up first.
What did Budget 2027 not change?
- No new e-invoicing rules. Neither the speech nor the tax measures document mentions e-invoicing. The current LHDN rules still apply, including the exemption for businesses with annual turnover below RM3 million, which took effect on 1 September 2026. See our LHDN e-invoicing guide.
- No change to the general SST rates. The SST measures are narrow: a sales tax refund for local traders and distributors supplying machinery and certain inputs to manufacturers, service tax on elderly care falling from 8% to 6% (both from 1 January 2027), and higher duty-free limits for visitors to Langkawi and Labuan. Our SST guide covers the general rules.
- No change to the 24% rate on SME chargeable income above RM600,000, or for companies that don't qualify as SMEs.
Other measures worth knowing
- Sole proprietors and partners pay personal income tax, not company tax. From YA 2027 the rate on chargeable income of RM70,001 to RM100,000 falls from 19% to 18%, and a new RM100,001 to RM150,000 band is taxed at 24% instead of 25%. Personal relief rises from RM9,000 to RM12,000. The 30% top rate will apply above RM1 million instead of RM2 million.
- Stamp duty. Opening a savings or current account will be fully exempt from stamp duty from 1 January 2027. Stamp duty on P2P financing agreements between SMEs and investors is capped at RM10 from 2027 to 2030; the full exemption ends on 31 December 2026. The RM10 cap also applies to mid-tier companies' supplier financing agreements that pay SME suppliers early, and to CAKNA II financing for small contractors on government contracts.
- E-Commerce Bill. The government will table an E-Commerce Bill at the next Parliament sitting to make online platforms and sellers more accountable, partly to protect local SMEs from foreign e-commerce companies operating without oversight.
How should SMEs prepare for Budget 2027?
- Re-run your CP204 for YA 2027 with your tax agent, using the proposed 14% and 16% rates.
- Confirm you still qualify as an SME. Check your paid-up capital, annual sales and foreign shareholding at the start of your basis period.
- Cost the RM2,000 wage now, even if you're exempt, and decide what you'll pay before June 2027.
- Time equipment purchases. Assets up to RM3,000 each and ACA-qualifying ICT and software can be written off quickly from 2027.
- Get your books current before applying for financing. A lender reads your accounts before your application. Software that posts double-entry books from your own invoices and bills, such as HumbleBear's accounting software, makes this easier.
Frequently asked questions
When was Budget 2027 tabled?
Prime Minister Datuk Seri Anwar Ibrahim tabled Budget 2027 in the Dewan Rakyat on Friday, 9 October 2026. The tax measures still have to be passed by Parliament in the Finance Bill before they become law.
What is the SME income tax rate for YA 2027?
Budget 2027 proposes 14% on the first RM150,000 of chargeable income, 16% on RM150,001 to RM600,000 and 24% on the rest, for companies and LLPs that qualify as SMEs. That is one percentage point lower than the 15% and 17% rates that apply up to YA 2026.
How much tax will my SME save under Budget 2027?
One percent of chargeable income up to RM600,000, so at most RM6,000 a year. A company with chargeable income of RM400,000 saves RM4,000. A company with chargeable income of RM120,000 saves RM1,200.
Is my SME exempt from the RM2,000 minimum wage?
According to the budget speech, SMEs with annual sales below RM50 million are exempt from the new RM2,000 rate, which starts in June 2027. The speech does not say how long the exemption lasts, so check the minimum wages order when it is published before changing your payroll.
Did Budget 2027 change e-invoicing or SST?
Budget 2027 announced no change to LHDN e-invoicing and no change to the general sales tax or service tax rates. The SST changes are narrow: a sales tax refund for local suppliers to manufacturers and a lower 6% service tax rate on elderly care.
How can my SME apply for Budget 2027 financing?
Through the agency or bank named for each fund, such as SJPP, CGC, BPMB, TEKUN, AIM, BSN or MDEC. Each sets its own criteria and opens applications on its own timeline, usually after the budget is passed. Prepare up-to-date accounts and a cash flow forecast before applying.
