Insights · Malaysia Tax
Malaysia Budget 2027: What Changes for Companies, Employers and Expatriates
Malaysia’s Budget 2027, tabled on 9 October 2026, proposes cutting the SME corporate tax rates to 14% on the first RM150,000 and 16% on the next RM450,000, while the 24% standard rate stays. It raises the minimum wage from RM1,700 to RM2,000 a month from June 2027, offers a 5% rate for Global Services Hub companies from January 2027 and extends the accelerated capital allowance to 31 December 2030. Each measure applies only once legislated.
For directors, CFOs and HR leads of Malaysian companies and foreign groups with a Sdn Bhd: what Budget 2027 proposes, when each measure takes effect and what to do before the Finance Bill.
| Measure | Budget 2027 proposal (9 October 2026) |
|---|---|
| SME corporate tax | 14% on the first RM150,000 and 16% on RM150,001 to RM600,000, down from 15% and 17% |
| Standard corporate tax | 24%, unchanged |
| Small-value assets | Capital allowance limit of RM3,000 per asset; overall cap of RM30,000 for non-SMEs |
| Accelerated capital allowance | Locally made machinery, ICT equipment and software, for spending from 1 January 2027 to 31 December 2030 |
| Global Services Hub | 5% for new hub companies, for MIDA applications from 1 January 2027, in five-year periods up to 30 years |
| Minimum wage | RM2,000 a month from June 2027; MSMEs with annual sales below RM50 million exempt |
| Salary deductions | From YA 2028, non-MSMEs deduct salaries only if paid through a financial institution or cashless instrument |
| Elderly care services | Service tax 6%, down from 8%, from 1 January 2027; fees up to RM96,000 per person a year exempt |
What Budget 2027 proposes for company tax
Prime Minister and Finance Minister Anwar Ibrahim tabled Budget 2027 in the Dewan Rakyat on 9 October 2026, with total spending of RM459.8 billion and a deficit target of 3.3% of GDP. The headline company measure is a one-point cut in the SME rates: 14% on the first RM150,000 of chargeable income and 16% on the next RM450,000, against 15% and 17% since YA 2023, from YA 2027. Income above RM600,000, and all income of companies outside the SME definition, stays at 24%.
The government puts the gain at up to RM6,000 a year for about 300,000 SMEs. On RM800,000 of chargeable income, a qualifying SME would pay RM141,000 instead of RM147,000. The MOF tax measures annex leaves the SME tests in LHDN’s Public Ruling No. 8/2025 unchanged: paid-up ordinary capital of RM2.5 million or less, gross business income of RM50 million or less and, since YA 2024, no more than 20% foreign ownership. A Malaysian branch of a foreign company still pays 24% on all profits.
The capital allowance limit for small-value assets rises to RM3,000 per asset, from RM2,000, and the overall cap for companies that are not SMEs rises to RM30,000, from RM20,000. The accelerated capital allowance on machinery bought from local manufacturers and on ICT equipment and software is extended from 31 December 2026 to 31 December 2030. Local traders and distributors that paid sales tax on machinery, spare parts and equipment get a refund facility from 1 January 2027. From YA 2028, companies other than MSMEs may deduct salaries only where they are paid through a financial institution or a cashless payment instrument, so cash payrolls lose their deduction.
Employers and expatriates: minimum wage and Dependant Pass work rights
The minimum wage rises from RM1,700 a month, under the Minimum Wages Order 2024, to RM2,000 a month from June 2027. MSMEs with annual sales below RM50 million are exempt from the new rate. The speech also set a RM2,500 monthly baseline for semi-skilled workers and graduates; its legal status is not yet clear.
No change to employer contribution rates was announced for EPF, SOCSO or EIS, so non-citizen staff, including Employment Pass holders, stay at the 2% EPF rate that began with October 2025 wages. The Budget adds employer tax deductions for repaying employees’ PTPTN education loans from 1 January 2027 to 31 December 2028.
For expatriates, the main change is that spouses of Category I Employment Pass holders who hold a Dependant Pass will be allowed to work in Malaysia from 1 January 2027, subject to conditions the Immigration Department’s Expatriate Services Division has yet to publish. The Employment Pass salary bands that took effect on 1 June 2026 were not changed. For resident individuals, the 30% top rate is proposed to apply above RM1 million of chargeable income, instead of RM2 million, from YA 2027.
Global Services Hub, stamp duty and service tax
For applications MIDA receives from 1 January 2027, new Global Services Hub companies pay 5% on qualifying hub income. Existing hub companies pay 5% where hub income exceeds their base income, the average of the last three years, and 15% where it does not. The incentive runs in five-year periods up to 30 years. For treasury fund management through onshore cash pooling, interest paid to non-residents is exempt from withholding tax and intercompany foreign currency loan agreements from stamp duty, and both exemptions extend to the Johor-Singapore Special Economic Zone package.
For stamp duty, duty above RM10 is remitted on peer-to-peer financing agreements between MSMEs and investors, and on mid-tier companies’ second-tier agreements for credit given to MSMEs, executed from 1 January 2027 to 31 December 2030. From 1 January 2027, opening savings and current accounts is exempt, and duty on foreign currency loan agreements is capped at RM2,000 up to RM100 million and RM5,000 above.
On service tax, elderly care services fall from 8% to 6% from 1 January 2027, and care fees of up to RM96,000 per person a year at registered providers are exempt. The annex does not change the general rates of 8% and 6% service tax or 10% and 5% sales tax, and does not mention e-invoicing, the capital gains tax on unlisted shares or the 2% tax on individuals’ dividends above RM100,000.
When Budget 2027 measures take effect
Budget measures are proposals until legislated. Income tax and stamp duty changes go into a Finance Bill; Budget 2026’s became the Finance Act 2025, gazetted on 31 December 2025. Service tax changes come by ministerial order, the minimum wage by a new Minimum Wages Order and the hub incentive through MIDA. Until then, the current rules apply.
What to do before the Finance Bill
- Confirm SME status on the first day of the YA 2027 basis period: paid-up capital, gross business income and foreign ownership.
- Prepare the YA 2027 CP204 estimate on current rates, and revise it in the 6th, 9th or 11th month once the Finance Act is gazetted.
- Schedule locally made machinery and ICT spending against the accelerated capital allowance, now proposed to run to 31 December 2030.
- Move any cash payroll to bank or cashless payment before the YA 2028 basis period if the company is not an MSME.
- Budget for a RM2,000 minimum wage from June 2027, or document the MSME exemption.
- Brief Category I Employment Pass holders on spouse work rights once conditions are published.
- Ask MIDA about the Global Services Hub terms before committing to a regional or treasury hub.
Frequently asked questions
Did Budget 2027 change Malaysia’s corporate tax rate?
The 24% standard rate is unchanged. Budget 2027, tabled on 9 October 2026, proposes cutting the SME rates by one point, to 14% on the first RM150,000 of chargeable income and 16% on the next RM450,000. The government estimates savings of up to RM6,000 a year for about 300,000 SMEs. The cut applies only once the Finance Bill is passed and gazetted.
When does Malaysia’s RM2,000 minimum wage start, and who is exempt?
Budget 2027 raises the minimum wage from RM1,700 to RM2,000 a month from June 2027. MSMEs with annual sales below RM50 million are exempt from the new rate. The increase takes legal effect through a new Minimum Wages Order, so employers should check that order for the exact start date, the exemption test and any phasing before changing payroll.
Can spouses of Employment Pass holders work in Malaysia from 2027?
Under Budget 2027, spouses of Category I Employment Pass holders who hold a Dependant Pass will be allowed to work in Malaysia from 1 January 2027, subject to conditions. The Expatriate Services Division has not yet published those conditions. Spouses of Category II and III holders were not included, so they still need their own pass or permission to work.
When do Malaysia’s Budget 2027 tax changes take effect?
The SME rates, small-value asset limits and individual tax rates are proposed from YA 2027, and the stamp duty, service tax, sales tax refund, hub and Dependant Pass measures from 1 January 2027. The minimum wage rises in June 2027 and the salary payment rule applies from YA 2028. Each still needs the Finance Bill or an order before it binds.
