Budget 2027 for Malaysian SMEs: what is proposed for your business

Is Budget 2027 law yet?

No. The budget speech says "it is proposed" for each tax measure. The income tax proposals become law only when Parliament passes a Finance Act that amends the Income Tax Act 1967. The SST proposals take effect only when an order is published in the Federal Gazette. As of 29 October 2026, we found no Finance Bill and no gazette order for these measures. Use the figures below to plan, and check the final law before you file.

Proposed SME income tax rates from YA 2027

Budget 2027 proposes lower tax rates for micro, small and medium companies (MSMEs) on the first two bands of chargeable income. The proposal would apply from the year of assessment (YA) 2027. The rate above RM600,000 and the standard corporate rate stay at 24%.

A worked example: an MSME with chargeable income of RM600,000 pays RM99,000 at the current rates (RM22,500 on the first RM150,000 plus RM76,500 on the next RM450,000). At the proposed rates it would pay RM93,000 (RM21,000 plus RM72,000), so RM6,000 less. That matches the government estimate of up to RM6,000 more income for more than 300,000 MSMEs. A company with chargeable income of RM200,000 would pay RM29,000 instead of RM31,000.

The MSME definition does not change. A company qualifies if its paid-up ordinary share capital is RM2.5 million or less and its annual sales are RM50 million or less. For a limited liability partnership, the test is capital contribution of RM2.5 million or less. A company is not eligible if more than 20% of its paid-up capital is owned, directly or indirectly, by foreign companies or by people who are not Malaysian citizens.

What about sole proprietors on Form B?

A sole proprietor pays tax at the individual rates, not the MSME rates. Budget 2027 also proposes changes to the resident individual rates from YA 2027:

• Chargeable income from RM70,001 to RM100,000: the rate falls to 18%.
• A new band from RM100,001 to RM150,000 at 24%.
• The top rate of 30% starts above RM1 million, not above RM2 million.
• The individual relief rises from RM9,000 to RM12,000.

What changes for SST?

Budget 2027 did not change the general SST rates or the registration thresholds. It proposed two changes from 1 January 2027, both subject to a gazette order. First, local traders or distributors that paid sales tax on certain machinery, spare parts, equipment and inputs supplied to manufacturers can claim the sales tax back. Second, the service tax rate on elderly care services falls from 8% to 6%, and annual fees up to RM96,000 per person at registered care centres are exempt. The SST rates and thresholds table has the full detail.

Does Budget 2027 change e-Invoice?

No. The budget speech and its tax appendices have no e-Invoice measure. The e-Invoice rules in force come from LHDN guidelines issued before the budget. Businesses with annual turnover below RM3 million are exempt, subject to the related-company rules (see Do I need e-Invoice?). For businesses in the up to RM5 million phase, the interim relaxation runs until 31 December 2027 (see e-Invoice deadlines).

Other Budget 2027 items for SMEs

What should an SME do now?

• Check if your company meets the MSME tests: capital, sales, and foreign ownership. The proposed lower rates apply only to MSMEs.
• Keep your books current, so your profit for the year is known before you estimate tax. See the Form B and Form C deadlines guide for due dates and CP204.
• If you are not an MSME and pay any salary in cash, plan to pay through a bank before YA 2028.
• Check the final Finance Act and gazette orders before you file a return that uses the new rates.

Lejar generates your profit and loss statement and balance sheet for any period you pick, so you can see your chargeable profit early. On the Starter plan and above, it also prepares the bi-monthly SST-02 summary from your records.