KUALA LUMPUR (Oct 9): Tax experts said measures proposed under Budget 2027 provide targeted relief to the middle-income segment and micro, small and medium enterprises (MSMEs) but may increase the tax load on individuals earning above RM1 million.

Budget 2027, tabled by Prime Minister Datuk Seri Anwar Ibrahim on Friday, introduces key individual tax reforms primarily aimed at reducing the cost of living for the middle 40% of earners (M40).

The basic individual tax relief will increase to RM12,000 from RM9,000, marking the first revision to the limit since 2010.

Meanwhile, the tax rates for individuals have been reduced by 1% for two taxable income brackets. For taxable income between RM70,000 and RM100,000, the rate will fall to 18% from 19%, while for the RM100,000 to RM150,000 band, the rate will come down to 24% from 25%.

The top marginal tax rate of 30%, which currently kicks in on taxable income exceeding RM2 million, will from 2027 apply to taxable income over RM1 million.

For MSMEs, the tax rate will be reduced to 14% from 15% on the first RM150,000 of chargeable income, while the rate on chargeable income exceeding RM150,000 up to RM600,000 will be lowered to 16% from 17%.

Here’s what top audit firms and tax experts said about Budget 2027:

Rather than introducing new tax reforms or new taxes, the government has adopted a targeted approach centred on strengthening competitiveness, encouraging investment, supporting productivity improvements and enhancing household resilience. The budget balances growth aspirations with fiscal responsibility, reflecting a conscious effort to ensure that Malaysia remains an attractive place to invest, do business and create jobs.

The combined effect of the higher individual tax relief and lower tax rates is meaningful for middle-income taxpayers.

An individual with a chargeable income of RM100,000 could enjoy tax savings of approximately RM840. For an individual with a chargeable income of RM150,000, the total tax savings could increase to approximately RM1,520.

Taken together, these measures provide targeted relief to the middle-income segment, helping households better manage rising living costs while supporting consumer spending and economic activity.

While middle-income taxpayers stand to benefit, Budget 2027 also seeks to strengthen the progressivity of the personal income tax system. The budget proposes increasing the tax rate applicable to the RM1,000,001 to RM2,000,000 chargeable income band from 28% to 30%.

Taxpayers within the RM1 million to RM2 million chargeable income band could face an additional tax liability of up to RM20,000, depending on their level of chargeable income.

From a policy perspective, the measure appears intended to partially offset the revenue forgone from the tax reductions granted to middle-income taxpayers while ensuring that higher-income individuals contribute a greater share of overall tax revenues.

The proposal therefore reinforces the progressive nature of Malaysia's personal income tax system by shifting part of the tax burden towards those with a greater ability to pay.

If I had to describe Budget 2027 in one word, it would be ‘inclusive’.  There is something for almost every segment of society and the business community, from tax relief to ease the rakyat’s financial burden to measures supporting businesses, particularly SMEs and MSMEs.

At the same time, the government is strengthening tax compliance, reflecting the need to balance relief and incentives with sustainable revenue collection. More broadly, the budget reflects the government’s intention to ensure that economic growth translates into meaningful outcomes for the rakyat through higher incomes, stronger businesses, better employment opportunities and more balanced regional development.

Support for middle-income (M40) households remains a key feature of Budget 2027, with measures aimed at easing financial pressures and strengthening household resilience. Budget 2027 also places SMEs and MSMEs at the heart of Malaysia’s economic agenda. Beyond the reduction in corporate tax rates for eligible businesses, the budget introduces a range of practical measures aimed at improving cash flow, encouraging reinvestment and enhancing productivity.

Importantly, Budget 2027 reflects a shift towards raising incomes rather than relying solely on direct assistance. The increase in the minimum wage, enhanced support for gig workers and broader efforts to strengthen workforce participation indicate a policy focus on improving earning capacity and long-term household resilience. 

Budget 2027 marks an important shift from laying the foundations for reform to delivering broader economic and social impact. As Malaysia enters its next phase of growth, the focus must be on raising productivity, strengthening business competitiveness and creating higher-value opportunities that translate into better jobs, stronger incomes and improved living standards. Ultimately, the budget’s success will be reflected in how effectively its measures create greater opportunities, deliver meaningful benefits for households and businesses, and support sustainable growth for the country.

At RM510 billion against RM470 billion this year, an increase of RM40 billion or roughly 8.5%, the budget remains expansionary, and yet, remarkably, the fiscal deficit is still projected to narrow from 3.6% in 2026 to 3.3% in 2027, on the path towards 3% by 2028. To expand spending and cut taxes while still reducing the deficit amid ongoing geopolitical volatilities, elevated oil prices and global trade uncertainty is no small achievement.

The logic of Budget 2027 is clear. Savings from subsidy targeting and stronger revenue collection are passed back to the rakyat and businesses, without loosening fiscal discipline.

SMEs who contribute around 40% of the economy and employ about half of the workforce gain the most from this budget. The SME income tax rate is cut by one percentage point to 14% on the first RM150,000 of chargeable income, and to 16% on income between RM150,000 and RM600,000. This could translate to total savings of RM6,000 a year, benefitting some 300,000 SMEs.

Financial services gain a longer runway for growth. Shariah-compliant fund managers receive a 40% income tax exemption for year of assessments 2028 to 2030, sukuk issuers can deduct their issuance costs, and single family offices in Forest City enjoy zero tax on qualifying income, with a new multi-family office model to follow. Together, these give fund managers, family offices and Islamic finance players clear reasons to build their operations in Malaysia.

On property-related measures, Budget 2027 extends and expands last year’s first-home relief. For homes priced up to RM750,000, stamp duty on loan agreements and instruments of transfer is fully exempt on the first RM500,000, while the balance qualifies for a 50% exemption, for sale and purchase agreements executed from Jan 1, 2027 to Dec 31, 2030. Say for a first home worth RM670,000, this means stamp duty relief on the full RM500,000 and half of the remaining RM170,000.

I particularly welcome the full stamp duty exemption for rescue contractors, developers and original purchasers of abandoned housing projects, a practical step towards the target of zero abandoned projects by 2030.

Despite its expansionary stance, Budget 2027 continues Malaysia’s fiscal consolidation path. The projected reduction in the fiscal deficit, together with governance reforms, signals the government’s commitment to preserving fiscal credibility while supporting growth and the rakyat.

Budget 2027 also marks a shift from establishing reform frameworks to prioritising measurable delivery. The introduction of a Government-Owned Entities Bill and enhanced procurement transparency, including the publication of contractor names and contract values under the Government Procurement Act, are important steps towards strengthening institutional governance, accountability and public confidence.

For businesses and investors, institutional strength, policy certainty and consistent implementation remain critical. As tax incentives, financing programmes and investment strategies evolve, timely guidance, practical transition arrangements, transparent processes and effective public service delivery will help reduce implementation friction, support long-term investment decisions and strengthen Malaysia’s competitiveness.

Budget 2027 provides relief where pressure is most immediate, particularly for lower- and middle-income households and smaller businesses. At the same time, it places greater emphasis on the foundations of long-term, sustainable growth through productivity enhancement, workforce development, technology adoption, investment attraction and stronger domestic capabilities.

The combination of fiscal discipline, targeted support and measures to strengthen competitiveness reflects a continued shift from short-term assistance towards structural reforms aimed at building a more resilient, innovative and higher-value economy. Effective implementation, policy certainty and strong public-private collaboration will be critical to translating these measures into meaningful and lasting outcomes for businesses, investors and the rakyat.

Overall, Budget 2027 stands as a defining national covenant, striking a delicate balance between fiscal discipline and social justice. By pairing M40 tax relief and enhanced business incentives with structural wage reforms and expanded targeted assistance, the budget demonstrates a commitment to elevating every segment of society.

As Malaysia navigates global economic headwinds and transitions towards an aged nation, Budget 2027 delivers a clear blueprint, one that empowers the nation to reach for new economic heights while remaining deeply rooted in the dignity and well-being of its people.

Tax deduction will be given to employers who repay PTPTN education loans on behalf of their employees, covering repayments made from Jan 1, 2027 to Dec 31, 2028. This would encourage private sector participation in easing graduates’ education loan burdens.

Employees may benefit from reduced outstanding loans and improved disposable income, while employers receive tax incentives for supporting employee welfare. At the national level, the measure may encourage more consistent loan repayments and strengthen PTPTN’s financial sustainability, ensuring continued funding for future students.

Effective from the Year of Assessment 2028, companies other than MSMEs would be allowed tax deductions on salary expenses only where salaries are paid through financial institutions or prescribed cashless payment instruments, in accordance with the Employment Act 1955. Tax deductions for other expenses will remain unaffected by this requirement.

Payroll transparency would be enhanced, tax compliance would be strengthened and irregular employment practices would be discouraged.

Non-MSMEs are also likely to be discouraged from employing undocumented migrants where cash payments often prevail, and the employment of legitimate employees will be enhanced. The measure also supports the government’s broader efforts to promote cashless transactions and formalise employment practices.

The Green Technology Tax Incentive is enhanced and extended until Dec 31, 2030, supporting Malaysia’s ambition to achieve net-zero carbon emissions by 2050. The revised incentives introduce new qualifying activities, including ocean thermal energy conversion, and expand eligible assets to cover locally produced electric vehicle infrastructure, waste recycling systems and water conservation technologies.

Compared with the existing framework, the revised incentives adjust investment allowance rates across qualifying activities and prioritise integrated renewable energy systems combined with energy storage. Businesses investing in eligible green projects and assets may enjoy investment tax allowances of up to 100%, subject to applicable conditions. By promoting renewable energy, energy efficiency and domestic green technology manufacturing, Malaysia can strengthen energy security, attract sustainable investments and enhance its competitiveness in the global green economy.

Beyond taxation, Budget 2027 reinforces the government’s emphasis on governance and accountability in public financial management.

Notably, Budget 2027 announced a RM1 billion Climate Fund managed by Retirement Fund (Incorporated) (KWAP) to catalyse climate-related investments. The government also allocated RM2.5 billion for water infrastructure programmes, including the replacement of ageing water pipes to enhance water security and resilience, as well as RM1.5 billion for the development of solar parks across government buildings to accelerate the public sector's transition towards clean energy and reduce carbon emissions.

These developments will open up tremendous opportunities for the profession to apply its competencies in financial reporting and assurance in the sustainability space, backed by standards and ethics. This will also strengthen expertise in sustainability disclosures and ESG performance measurement, leveraging expanded opportunities in sustainability assurance, green financing and carbon-related accounting.

Initiatives to increase funding for higher education, coupled with tax incentives to enable public universities to secure additional funding, are aligned with MIA’s proposal for higher allocations to institutions of higher learning. These measures will enable institutions to strengthen their training and capacity-building initiatives, particularly for educators.

Meanwhile, professional development and training also benefited from key measures. As the developer of the profession, MIA welcomes Budget 2027’s emphasis on upskilling and reskilling programmes, continuing professional development programmes for professionals and workforce development initiatives aligned with industry needs to be offered via HRD Corp as well as the upskilling opportunities through the Skills Development Fund, Mara Youth Talent Development and Bakat Madani.

Continuous learning and professional development will be critical in ensuring that accountants remain competent, future-relevant and equipped to deliver greater value to businesses and society.

Click here for all you need to know about Malaysia's Budget 2027.