Budget 2027 at a glance
Prime Minister Datuk Seri Anwar Ibrahim tabled Budget 2027 on 9 October 2026, and 2027 has been named the Year of Malaysian MSMEs. For small and medium business owners, the headline is simple: you will pay less tax, and you have more time before the higher minimum wage reaches you.
The quick answer: if your company qualifies as an SME, its income tax falls by one percentage point from Year of Assessment (YA) 2027. That is a saving of up to RM6,000 a year. SMEs with sales under RM50 million are also exempt, for now, from the minimum wage rise to RM2,000 in June 2027.
Here is what changes, and what you should do before the year ends.
Note: tax measures announced in the Budget take effect only once the Finance Bill is passed by Parliament.
1. A lower SME income tax rate from YA 2027
The biggest change for most owners is a one percentage point cut on the first two tax bands for SMEs.
| Chargeable income | Until YA 2026 | From YA 2027 |
|---|---|---|
| First RM150,000 | 15% | 14% |
| RM150,001 to RM600,000 | 17% | 16% |
| Above RM600,000 | 24% | 24% |
What it means in ringgit:
| Your company's chargeable income | Tax before | Tax after | You save |
|---|---|---|---|
| RM100,000 | RM15,000 | RM14,000 | RM1,000 |
| RM400,000 | RM65,000 | RM61,000 | RM4,000 |
| RM600,000 | RM99,000 | RM93,000 | RM6,000 |
RM6,000 is the most any SME saves compared to the previous year of assessment, because income above RM600,000 stays at 24%. The government estimates around 300,000 businesses will benefit.
Does your company qualify? Under the current rules, a Sdn Bhd gets SME tax rates if its paid-up capital is RM2.5 million or less, its gross business income is RM50 million or less, and no more than 20% is owned by foreign companies or individuals. Companies that belong to a larger group may not qualify. If you are unsure, it is worth checking before you plan your YA 2027 tax estimate (Form CP204).
2. Minimum wage rises to RM2,000, but most SMEs get more time
The national minimum wage goes up from RM1,700 to RM2,000 a month from June 2027. MSMEs with annual sales below RM50 million are exempt from this increase for now, to give them room to adjust.
Budget 2027 also sets a RM2,500 monthly minimum for graduates and semi-skilled workers.
What this means for you:
- If your sales are under RM50 million, you do not have to move to RM2,000 in June 2027, but plan for it, as staff will compare offers.
- If your sales are above RM50 million, budget for the higher wage bill now. Remember that EPF, SOCSO and EIS contributions rise with salaries too.
- Non-MSMEs will only be able to claim tax deductions on salaries paid through a bank account or other cashless method from YA 2028. MSMEs are not affected, but paying salaries by bank transfer is good practice anyway.
3. Other tax changes worth knowing
Small-value assets. From YA 2027, SMEs can claim a 100% capital allowance on assets costing up to RM3,000 each, up from RM2,000.
Accelerated capital allowance. The Accelerated Capital Allowance for expenditure on ICT equipment, software and locally made plant and machinery is extended to 31 December 2030. If you were planning a system upgrade, you have more time to claim it.
Free stamp duty on new bank accounts. From 1 January 2027, opening a savings or current account carries no stamp duty.
Cheaper financing paperwork. Stamp duty is capped at RM10 on peer-to-peer (P2P) financing agreements for MSMEs, and on supplier financing arrangements where larger companies extend credit to MSME suppliers. Both apply to agreements signed from 1 January 2027 to 31 December 2030.
Employer help with PTPTN. Employers who repay their full-time employees' PTPTN loans can claim a tax deduction for repayments made from 1 January 2027 to 31 December 2028.
4. Grants and financing for SMEs
Total SME financing and guarantee facilities rise to RM57 billion in 2027, up from RM50 billion. The schemes most relevant to small businesses are:
| Support | What it offers |
|---|---|
| SJPP and CGC guarantees | Up to RM32 billion in financing guarantees, so banks can lend to SMEs with less collateral |
| Bank Negara SME fund | RM5 billion for SMEs affected by the West Asia conflict |
| Microfinancing | Through AIM, TEKUN Nasional and BSN (RM1.7 billion from BSN alone) |
| MDEC AI and automation fund | RM30 million to help 4,000 MSMEs adopt AI and automate operations |
| Halal certification | Matching grant of up to RM5,000 for first-time certification |
| Sejahtera MADANI grants | RM200 million for equipment and training |
| Export support | RM1 billion export financing through Bank Pembangunan Malaysia, plus market support through MATRADE |
Application details are usually released by each agency in the months after the Budget. Banks will ask for up-to-date management accounts and filed tax returns, so keeping your books current makes it easier to apply.
What to do now: a checklist for SME owners
- Confirm your company qualifies as an SME for tax: paid-up capital, gross income and foreign ownership.
- Revise your tax estimate (Form CP204) for YA 2027 using the new 14% and 16% rates. For a December year-end, it is due by 1 December 2026.
- Plan your asset purchases. Items up to RM3,000 each can be claimed in full as capital allowance from YA 2027.
- Check your annual sales against the RM50 million minimum wage exemption.
- Plan your 2027 payroll budget, including EPF, SOCSO and EIS on any salary increases.
- Get your accounts up to date if you plan to apply for financing or grants in 2027.
Frequently asked questions
When does the new SME tax rate start?
From Year of Assessment 2027, once the Finance Bill is passed. For a company with a December year-end, that covers profits earned from 1 January to 31 December 2027.
How much will my company save in taxes compared to the previous year?
One percentage point on chargeable income up to RM600,000. That is RM1,500 on the first RM150,000 and up to RM4,500 on the next RM450,000, so a maximum of RM6,000 a year.
Do I have to pay RM2,000 minimum wage from June 2027?
Only if your business has annual sales of RM50 million or more. MSMEs below that are exempt for now, but the exemption is temporary.
Is a sole proprietorship affected by the SME tax cut?
No. The cut applies to company income tax. Sole proprietors pay personal income tax on business profits, which follows different rates. If your business is growing, it may be worth comparing the two structures.
Not sure how Budget 2027 affects your business?
Every business is different, and it depends on your structure, income and timing. Centry can make sure your books are up to date for your forward-looking plans in 2027, so you can see where your business is heading and plan ahead with confidence. As your appointed tax agent, we can also take care of the details such as checking whether you qualify for SME tax rates and updating your tax estimates.
This article is general information based on Budget 2027 proposals as tabled on 9 October 2026. It is not tax advice, and details may change when the Finance Bill is passed.
