Malaysia Budget 2027: Reaching for the Skies, While Anchored on Our Values

Views on Budget 2027

“We see the Budget 2027 as reinforcing Malaysia’s focus on investment-led growth, with greater emphasis on developing local businesses and strengthening strategic industries, especially in semiconductors, artificial intelligence, advanced manufacturing, digital infrastructure, and the energy transition. The increased participation of government-linked investment companies (GLICs), including Khazanah Nasional through Jelawang Capital and KWAP through Dana Perintis in developing startups, is encouraging for Malaysia’s growing private capital market. However, the longer-term opportunity goes beyond providing funding to creating an environment where Malaysian businesses can scale and attract private investment. With Singapore having established itself as a regional fund management hub⁴, Malaysia has vast potential to build on its industrial strengths and domestic investments to attract greater participation from both private and international investors.”

Manas Tamotia

Managing Director, Performance Improvement Head, Singapore, Malaysia and Vietnam

“ASEAN’s investment competition is increasingly about where businesses make decisions, manage capital, and build capabilities — not simply where they secure the lowest tax rate. Malaysia’s enhanced Global Services Hub incentive⁵ strengthens its proposition for regional headquarters and treasury operations. The longer incentive horizon and targeted treasury exemptions signal an ambition to attract substantive regional functions, skilled talent, and investment with lasting economic value. For multinational groups within the Global Minimum Tax regime, however, a low incentive rate does not necessarily translate into an equivalent tax saving. Investors will assess the benefit retained after any top-up tax, alongside talent availability, operating costs, and regulatory certainty. The jurisdictions that turn policy ambition into clear rules, timely approvals, and predictable administration will have the competitive edge.”

Abhijit Ghosh

Managing Director & South East Asia Tax Leader

“The MADANI Budget 2027 reflects a careful approach to tax policy, balancing the immediate needs of the rakyat with the country’s longer-term fiscal and economic priorities. While the overall tone and direction are broadly expected, they reinforce the government’s commitment to supporting households and encouraging investment, while making it easier to do business in Malaysia. The absence of major new taxes is a welcome development, particularly following several years of significant tax reforms, such as changes to the taxation of foreign-sourced income, capital gains tax, e-Invoicing, Global Minimum Tax, and stamp duty. This provides businesses with some breathing room and greater certainty in their investment planning, including M&A and restructuring activities, while allowing them to focus on longer-term growth.”

Kei Ooi

Senior Director, Tax

Budget 2027 Tax Proposals	Proposed Changes	A&M Comments
Increase in Individual Tax Relief	The individual tax relief threshold, which has remained unchanged since 2010, will be increased from RM9,000 to RM12,000.	Raising the relief amount may ease cost-of-living pressures and increase taxpayers’ disposable income, particularly for those in the M40 income group.
Reduction in Resident Individual Income Tax Rates	The tax rate for chargeable income between RM70,001 and RM100,000 will be reduced to 18%, while the rate for chargeable income between RM100,001 and RM150,000 will be reduced to 24%.	These changes are intended to provide more relief to the middle- and upper-middle-income earners.
Adjustment of Income Tax Rate for High-Income Earners	The income tax rate applicable to high-income earners with chargeable income exceeding RM1,000,000 will increase from the existing rate of 28% to 30%.	The adjustment to the 30% rate reinforces progressive taxation, with higher-income earners contributing more to government revenue. This is broadly consistent with the approach adopted across several ASEAN economies as well.

Budget 2027 Tax Proposals	Proposed Changes	A&M Comments
Reduction in Income Tax Rates for Micro, Small, and Medium Enterprises (MSMEs)	• First RM150,000 of chargeable income: reduced from 15% to 14%. • RM150,001 to RM600,000: reduced from 17% to 16%. • Above RM600,000: unchanged at 24%. • Effective from YA 2027.	While the immediate savings may be modest, the measure is particularly relevant amid rising business costs.
Capital Allowance for Small-Value Assets (SVA)	• Value of each SVA increases from RM2,000 to RM3,000. • Total SVA claimable by companies other than MSMEs increases from RM20,000 to RM30,000 per YA. • MSMEs retain their unlimited SVA claim. • Effective from YA 2027.	The higher limits allow more low-value assets to qualify for immediate capital allowance claims. Companies should review and update their capital allowance schedules for YA 2027.
Income Tax Exemption for Shariah-Compliant Fund Management Services	• Exemption on statutory income from managing Shariah-compliant funds decreases from 60% to 40% and is extended for three years. • Effective from YA 2028 to YA 2030.	While the extension of the Shariah-compliant fund management incentive shows continued support, the reduction in the exemption from 60% to 40% suggests a gradual move toward less generous tax concessions.
Income Tax Deduction for Salary Payments	• Companies other than MSMEs may claim a deduction for wage expenditure only if wages are paid through financial institutions or cashless payment instruments permitted under the Employment Act 1955. • Effective from YA 2028.	The measure reinforces the government’s efforts to strengthen payroll transparency.
Tax Incentive for Global Services Hub (GSH)	• New companies (no prior GSH or Principal Hub activity): a 5% tax rate on GSH income. • Existing GSH or Principal Hub companies: 15% on income up to the base income and 5% on income above it. Base income is the average income for the previous three years. Existing company applying for an extension must also undertake additional new services. • Incentives are granted in five-year periods, up to a maximum of 30 years, subject to performance. • Companies must carry out the qualifying services (regional P&L or business management, strategic business planning, and corporate development) plus at least two additional services. • Companies undertaking treasury fund management (cash pooling via onshore intermediaries): qualify for a withholding tax exemption on interest paid to non-residents and a 100% stamp duty exemption on foreign currency loan agreements between companies. These incentives are also extended to the Johor-Singapore Special Economic Zone (JS-SEZ) package. • Applies to applications received by MIDA from January 1, 2027.	The enhanced GSH incentives reflect the government’s continued efforts to make it easier to do business in Malaysia, enabling global companies to operate locally and attract highly skilled talent. The preferential tax rates and extended incentive period may further strengthen Malaysia’s position as a regional business hub. However, the 5% rate for existing companies applies only to income above the historical baseline, making baseline assessment important when evaluating the potential tax benefits. Companies should also ensure their regional functions, personnel, and transfer pricing arrangements are aligned with their approved incentive commitments.
Green Technology Tax Incentive	GITA Project • Green Investment Tax Allowance (GITA) Project, Tier 1 (green hydrogen and, newly, ocean thermal energy conversion): a 100% allowance, set off against 100% or 70% of statutory income, for five years, with a possible five-year extension (5 + 5 years). • GITA Project, Tier 2 (EV charging stations and renewable energy: biomass, biogas, mini hydro, geothermal, and wind): allowance reduced from 100% to 60%, set off against 70% of statutory income, for five years. GITA Assets • GITA Assets, Tier 1 (100%): locally produced EV infrastructure, waste and wastewater systems, commercial EVs such as buses, lorries and forklifts, and renewable energy systems integrated with battery or energy storage. • GITA Assets, Tier 2 (60%): the same systems when not locally produced, and standalone renewable energy systems. • Applications for GITA Assets must be made to MGTC within 24 months of purchase. • GITA Project: applications received by MIDA from January 1, 2027, to December 31, 2030. • GITA Assets: purchases verified by MGTC from January 1, 2027, to December 31, 2030.	The incentives continue to promote the adoption of green technologies and sustainable practices among businesses, by project or asset category. Companies with planned investments should compare the proposed terms with the current incentives before deciding when to apply.
Tax Incentives for Angel Investors	• Angel investors will continue to enjoy an income tax exemption on aggregate income equal to the amount invested in ordinary shares of pre-seed and seed stage technology startups, with the incentive extended for four years. • Applies to investments made from January 1, 2027, to December 31, 2030.	The income tax exemption for qualifying angel investments is extended for four years to attract capital investment in technology startups.
Extension of Accelerated Capital Allowance (ACA) on Capital Expenditure	• ACA can be claimed in full within two years through an initial allowance of 20% and an annual allowance of 40% for locally produced plants and machinery, ICT equipment, software, consultation, licensing, and incidental fees related to the development of customized computer software, • The incentive is extended for four years for qualifying capital expenditure incurred from January 1, 2027, to December 31, 2030.	This extension encourages companies to invest in locally produced assets, supports domestic suppliers, and improves productivity.
Sales Tax Refund Facility for Traders	• Refunds are available to eligible local traders or distributors that have paid sales tax on goods supplied to manufacturers: Machinery, spare parts, and equipment under Item 55, Schedule A, Sales Tax (Persons Exempted from Payment of Tax) Order 2018; and Inputs for the manufacture of pharmaceutical products, animal feed, fertilizers, and pesticides under Schedule B, Sales Tax (Persons Exempted from Payment of Tax) Order 2018. • Effective from January 1, 2027.	The refund facility may improve access to sales-tax relief for manufacturers buying through local traders or distributors. However, guidance from the Royal Malaysian Customs Department (RMCD) on eligibility, supporting documents, and refund timelines is not yet available.
Tax Incentive for Shipping Companies	• The full income tax exemption for shipping companies is extended for 10 years, subject to the following conditions: Strategic management and effective control must be exercised in Malaysia; Minimum annual operating expenditure of RM250,000 in Malaysia for each Malaysian ship; and Employment of at least four Malaysian citizens with an average monthly salary of RM15,000 for each Malaysian ship. • Effective from YA 2027 to YA 2036.	The income tax exemption for shipping companies is extended for 10 years, supporting the long-term growth and competitiveness of the domestic shipping industry.

Budget 2027 Tax Proposals	Proposed Changes	A&M Comments
Stamp Duty Exemption for Revival of Abandoned Housing Projects	• A 100% exemption is reintroduced on loan agreements and instruments of transfer executed by rescue contractors or developers and original buyers. • The previous exemption expired on December 31, 2025. • Applies to instruments executed from January 1, 2027, to December 31, 2030.	The exemption supports efforts to revive abandoned housing projects by making rescue efforts more commercially viable for developers. As the new period begins on January 1, 2027, instruments executed in 2026 may fall outside the exemption.
Stamp Duty on Foreign Currency Loan or Financing Agreements	• Currently subject to ad valorem stamp duty at 0.5%. • Proposed maximum stamp duty on loans or financing from banks in Malaysia: RM2,000 for amounts up to RM100 million, and RM5,000 for amounts above RM100 million. • For agreements executed from January 1, 2027.	The proposed cap could reduce duty on a RM100 million facility from RM500,000 to RM2,000. This significantly reduces financing costs for businesses, particularly those undertaking large capital investments or regional expansion, and increases the competitiveness of Malaysian banks in providing foreign-currency financing.
Remission of Stamp Duty on Loan Agreements by Mid-Tier Companies (MTCs)	• Stamp duty in excess of RM10 is remitted on second-tier agreements between MTCs and financial institutions relating to excess credit facilities extended to MSME suppliers. • First-tier agreements remain at the 0.5% ad valorem rate. • Applies to second-tier agreements executed from January 1, 2027, to December 31, 2030.	This measure supports MSMEs’ cash flow by facilitating access to bank credit. The stamp duty remission reduces the cost of second-tier loan agreements, helping ease financing costs and improve liquidity for MSMEs.

How Can A&M Help

For further insights into Malaysia Budget 2027 and its potential implications for your business, or to discuss opportunities for doing business in Malaysia, please contact our Malaysia Tax team at MYSTAX@alvarezandmarsal.com or +603 2729 1872.

Important: The above discussion covers selected tax measures announced in the Malaysia Budget 2027. These measures are subject to final legislation, which may result in outcomes that differ from those described above.

	Johor–Singapore Special Economic Zone (JS-SEZ) attracts RM132 billion in investments, with the blueprint expected by the end of 2026.
	Government-linked investment companies (GLICs) will invest RM2 billion to strengthen Bumiputera businesses. Khazanah and Unit Peneraju Agenda Bumiputera (TERAJU) will establish a RM250 million Dana Ciptawan to support the expansion of Bumiputera mid-tier companies. Khazanah’s Jelawang Capital and Kumpulan Wang Persaraan (Diperbadankan) (KWAP)’s Dana Perintis will invest RM450 million to support startup development.
	Khazanah Nasional Berhad and InvestPenang will establish a RM100 million Strategic Investment Fund for the semiconductor and advanced manufacturing sectors. Khazanah and KWAP will invest RM1.2 billion to support local semiconductor companies in moving into higher-value segments of the industry.
	Tenaga Nasional Berhad (TNB) will invest RM15 billion to strengthen the national grid. KWAP’s Dana Iklim⁺and UEM Lestra will invest RM1 billion in energy-transition initiatives.
	Government-Linked Investment Companies (GLICs) will mobilize RM25 billion in additional investments through GEAR-uP to support domestic economic activity. RM32 billion in business financing guarantees, of which RM1 billion is reserved to support local companies undertaking M&A. The Securities Commission Malaysia and Hong Kong’s securities regulator have formalized cooperation to facilitate dual listings by Malaysian companies, with matching grants available to help cover listing costs.

Malaysia Budget 2027: Reaching for the Skies, While Anchored on Our Values

KEY FIGURES AT A GLANCE