Budget 2027 for Businesses: What Changes, and When Each Change Starts

Budget 2027 was tabled in the Dewan Rakyat on Friday 9 October 2026. The speech carries the headlines. The detail sits in a separate Ministry of Finance document, the Budget 2027 tax measures annex, which runs to 36 appendices and gives, for each measure, the current position, the proposal and its effective date.

Those effective dates are not all the same. Among the measures in this article, most start from the year of assessment 2027, one from the year of assessment 2028, several from 1 January 2027, and two depend on the date MIDA receives an application. Planning goes wrong when a measure read as “from next year” turns out to depend on a filing date, an execution date or a purchase date.

This article takes the measures that bear on companies and employers, sets out what each one proposes, and states the effective date exactly as the annex gives it.

Everything here is a proposal

Budget measures are not law on the day they are announced. Income tax changes are enacted through a Finance Bill. Stamp duty exemptions and remissions are made by order, as the annex’s own references to the Stamp Duty (Exemption) (No. 3) Order 2012 and the existing CAKNA and P2P remissions show.

As at 13 October 2026, the Dewan Rakyat’s bills list shows the Supply Bill 2027 at first reading on 6 October 2026, and no Finance Bill 2026. For comparison, last year’s Finance Bill 2025 had its first reading on 18 November 2025 and was passed by the Dewan Rakyat on 1 December 2025. The Bill may differ from the annex in places. Nothing below should be acted on as settled until the enacting instrument is published.

The start-date table

1. Company tax: the MSME rate, and who is an MSME

Appendix 11 proposes a cut of one percentage point in each of the two lower MSME bands: the first RM150,000 of chargeable income from 15% to 14%, and RM150,001 to RM600,000 from 17% to 16%. Chargeable income above RM600,000 stays at 24%. The effective date is from the year of assessment 2027.

YA 2027 means the financial year that ends in 2027. If your year end is 31 December, that is the year ending 31 December 2027. If your year end is 30 June, it is the year from 1 July 2026 to 30 June 2027, which has already started.

The annex describes an MSME as a company with paid-up ordinary share capital of RM2.5 million and below, or an LLP with capital contribution of RM2.5 million and below, with annual sales not exceeding RM50 million. That is a summary. The full test is in the Income Tax Act 1967 and is explained in HASiL’s Public Ruling No. 8/2025, Tax Treatment for Micro, Small and Medium Companies, published on 22 December 2025. Two conditions in that ruling catch companies that assume they qualify:

• Foreign ownership. Effective from YA 2024, a company or LLP with more than 20% of its paid-up ordinary share capital or capital contribution owned, directly or indirectly, by one or more companies incorporated outside Malaysia or by one or more individuals who are not Malaysian citizens is not eligible for the special rate (paragraph 6.2.1(d)). The ruling’s Example 15 is a Malaysian company wholly owned by a Singapore company whose ultimate shareholders are both Malaysian citizens. It does not qualify.
• Related companies. The special rate does not apply where more than 50% of the company’s paid-up ordinary share capital is owned, directly or indirectly, by a related company with paid-up ordinary share capital exceeding RM2.5 million, or the reverse, or where both are owned by a third company (paragraph 5.3.3(a)).

The paid-up capital test is applied at the beginning of the basis period, and the RM50 million test is applied to gross income from business sources, not to turnover of every kind (paragraphs 5.3.1 and 5.3.2).

So a foreign-owned subsidiary, however small, pays 24% on every ringgit and gets nothing from Appendix 11. The same ownership test decides the small value asset treatment below.

2. Capital allowances: small value assets and the ACA extension

Small value assets (Appendix 12). Today, any asset costing not more than RM2,000 can have its full cost claimed as capital allowance in one year, instead of being written off over several years. Two limits apply: the RM2,000 is tested asset by asset, and for companies other than MSMEs the total claimed this way across all such assets is capped at RM20,000 a year. MSMEs have no yearly cap. The proposal lifts the per-asset limit to RM3,000 and the non-MSME yearly cap to RM30,000, from the year of assessment 2027. So a non-MSME could claim up to ten RM3,000 assets in full in one year, where today it is ten RM2,000 assets. HASiL’s Public Ruling No. 4/2026 on this allowance was published on 2 October 2026, a week before the Budget, and sets out the current rules.

Accelerated Capital Allowance (Appendix 28). The ACA of 20% initial allowance and 40% annual allowance, which lets the expenditure be fully claimed within two years, currently applies to qualifying capital expenditure incurred from 11 October 2025 to 31 December 2026 on four categories: heavy machinery from local manufacturers, plant and general machinery from local manufacturers, ICT equipment and computer software packages, and consultation, licensing and incidental fees for developing customised software. The proposal extends it by four years, to expenditure incurred from 1 January 2027 to 31 December 2030.

The test is the date the expenditure is incurred. The current window and the proposed one are continuous, so there is no gap, but a purchase that straddles 31 December 2026 still needs its incurred date fixed under the usual rules.

This ACA is not the Automation Capital Allowance covered in our separate article. The initials are the same; the incentive and the qualifying expenditure are not.

HASiL opened a public consultation on 8 October 2026 on a proposed Public Ruling, Accelerated Capital Allowance. The consultation closes on 21 October 2026, so a ruling on this subject is in preparation.

3. Payroll: the YA 2028 salary deduction rule

Appendix 14 starts a year later than the other measures here.

Today, salary is deductible under section 33 of the Income Tax Act 1967 however it is paid. The proposal is that a tax deduction on salary expenses be allowed only for payments made through financial institutions or cashless payment instruments, as prescribed under the Employment Act 1955, except for salary payment transactions by Micro, Small and Medium Enterprises. Deductions for expenses other than salary are not affected by the method of payment.

The effective date is from the year of assessment 2028, not 2027. For a December year end, that is the financial year beginning 1 January 2028. For a June year end, the YA 2028 basis period begins on 1 July 2027.

The annex leaves two things unsaid. It does not define which MSMEs are exempt: the test in Appendix 11 is for the tax rate, and Appendix 14 does not refer to it. And it does not say what counts as a cashless payment instrument beyond the reference to the Employment Act 1955. Both will have to come from the Finance Bill or from HASiL.

An employer paying any staff in cash has a year’s notice.

4. Two other employer measures

PTPTN repayments (Appendix 30). An employer who repays an employee’s PTPTN loan would get a tax deduction for repayments made from 1 January 2027 to 31 December 2028, on three conditions: the employer imposes no payment on the employee in return, the employee is full-time, and the employee is not the owner of the business and has no family ties with the employer. A deduction of this kind last existed for repayments made from 1 January 2019 to 31 December 2021.

Individual tax bands and reliefs (Appendices 1 and 2). From YA 2027 the 19% band for chargeable income of RM70,001 to RM100,000 falls to 18%, a new 24% band covers RM100,001 to RM150,000, the 28% band ends at RM1,000,000 instead of RM2,000,000, and 30% applies above RM1,000,000. The personal relief for the individual and dependent relatives rises from RM9,000 to RM12,000. Both change what employees pay for 2027, and both are questions staff will ask HR.

5. Investment incentives: the Global Services Hub and GITA

Global Services Hub (Appendix 23). The GSH incentive currently offers a corporate rate of 5% or 10% on an outcome basis, plus a 15% personal rate for three consecutive years of assessment for three non-citizen individuals holding key posts or C-suite roles, for applications received by MIDA from 14 October 2023 to 31 December 2027.

The proposal restructures it. A new company, meaning one that has not carried out GSH or Principal Hub activities, would pay 5% on GSH income. An existing company, meaning one previously approved for GSH or PH, or one applying for an extension with additional new services, would pay 15% on income up to its base income and 5% on income above it, base income being the average income of the last three years. The incentive period is every five years up to a maximum of 30 years, subject to the company’s performance and commitment. The company must undertake at least two qualifying activities from strategic services, business services (including treasury fund management) or shared services.

The treasury addition is new. A GSH company carrying out treasury fund management for cash pooling through onshore intermediaries would get withholding tax exemption on interest paid to non-residents and 100% stamp duty exemption on foreign-currency loan agreements between companies. The annex says these two additional incentives are also expanded to the Johor-Singapore Special Economic Zone incentive package.

The effective date is for applications received by MIDA from 1 January 2027. The annex does not say what happens to an application received by MIDA in the last quarter of 2026, or whether a company can choose between the current terms and the proposed ones. A group weighing an application now should ask MIDA before filing, because the date of receipt is what the annex turns on.

Green Technology Tax Incentive (Appendix 25). The current GITA runs for MIDA applications and MGTC-verified purchases from 1 January 2024 to 31 December 2026. The proposal reshapes it and runs it to 31 December 2030:

• GITA Project, Tier 1: green hydrogen and, newly, ocean thermal energy conversion, at 100% GITA set off against 100% or 70% of statutory income, for 5 + 5 years.
• GITA Project, Tier 2: EV charging stations and renewable energy systems (biomass, biogas, mini hydro, geothermal, wind), at 60% GITA set off against 70%, for 5 years. Today EV charging and integrated waste management sit in a 100%/100% tier, and biomass, biogas, mini hydro, geothermal, solar and wind sit in a 100%/70% tier.
• GITA Assets, Tier 1: a list of qualifying assets approved by the Finance Minister (listed vehicles, locally produced EV infrastructure, waste composting and recycling systems, and wastewater recycling and rainwater harvesting systems), and renewable energy integrated systems including solar with battery or energy storage, at 100%/70%.
• GITA Assets, Tier 2: EV infrastructure, waste composting and recycling systems, and wastewater recycling and rainwater harvesting systems, without the locally produced qualifier, and renewable energy systems (biomass, biogas, mini hydro, geothermal, wind), at 60%/70%.
• A new condition: the company shall apply to MGTC within 24 months from the date of purchase of the qualifying asset.

Today, commercial solar generation sits in GITA Project Tier 3, and solar system leasing has its own Green Income Tax Exemption (GITE); both run for applications received by MIDA from 1 January 2024 to 31 December 2026. Neither appears in the proposal. The proposed GITA Project tiers list green hydrogen, ocean thermal energy conversion, EV charging and renewable energy systems of biomass, biogas, mini hydro, geothermal and wind, and the proposal does not mention GITE solar leasing. Solar appears in the proposal only in GITA Assets Tier 1, for own consumption, as part of a renewable energy integrated system with battery or energy storage. As the annex stands, the incentive for solar projects for business use ends with applications received by MIDA on or before 31 December 2026, and the annex proposes no extension. Integrated waste management is in the same position: it is in the current Tier 2 and in neither proposed Project tier.

The effective dates are different for the two limbs: GITA Project turns on the date MIDA receives the application, GITA Assets on the date MGTC verifies the purchase, both from 1 January 2027 to 31 December 2030. A project that would score 100% under the current Tier 2 or Tier 3 and 60% under the proposed Tier 2 has until 31 December 2026 to get its application in under the current terms, if MIDA accepts it on those terms. Our article on green manufacturing and ESG incentives describes the current tiers.

Angel investors and equity crowdfunding (Appendices 26 and 27). Both exemptions, which currently end on 31 December 2026, would be extended for investments made from 1 January 2027 to 31 December 2030. The ECF exemption remains 50% of the investment, capped at RM50,000 a year and at 10% of aggregate income, with the other conditions unchanged.

6. Financing and stamp duty

Five stamp duty measures bear on business borrowing. All turn on the execution date of the instrument.

• Foreign currency loans (Appendix 19). Loan or financing agreements in foreign currency from banks in Malaysia, now charged ad valorem at 0.5%, would be capped at RM2,000 for facilities up to RM100 million and RM5,000 above that, for agreements executed from 1 January 2027.
• Account opening (Appendix 18). The RM10 duty on instruments for opening savings and current accounts that contain an undertaking creating a legal obligation, indemnity, guarantee or liability would be fully exempted for individuals and businesses from 1 January 2027.
• P2P financing (Appendix 21). The current 100% exemption on MSME loan agreements through SC-registered P2P platforms ends on 31 December 2026. From 1 January 2027 to 31 December 2030 it becomes a remission of duty above RM10.
• Supplier financing by mid-tier companies (Appendix 22). Duty above RM10 would be remitted on the second tier agreement, between the MTC and the financial institution, for the excess credit facility given to MSME suppliers, on condition that the supplier has fulfilled its contract with the MTC and is not the MTC’s parent, subsidiary or related company. The first tier credit facility agreement stays at 0.5%.
• CAKNA (Appendix 20). The remission of duty above RM10 for CAKNA I agreements is extended by two years, to agreements executed from 1 January 2029 to 31 December 2030, and CAKNA II, which lapsed on 31 December 2025, is reintroduced for agreements from 1 January 2027 to 31 December 2030.

What to do before 31 December 2026

If you are a foreign-owned company expecting the 14% rate: check the 20% ownership test in Public Ruling 8/2025 before building it into a forecast.

If your financial year does not end in December: map YA 2027 and YA 2028 to your own basis periods. The salary deduction rule may bite from 1 July 2027 or 1 October 2027 rather than 1 January 2028.

If you pay any salary in cash: plan the move to bank transfer or a prescribed cashless instrument during 2027, unless you are confident the MSME exemption covers you, and remember the annex does not yet say how that exemption is defined.

If you are planning a GSH or GITA application: the application receipt date decides which terms apply. Ask MIDA now whether an application received before 1 January 2027 is assessed on the current terms, and whether that is what you want.

If you are planning a commercial solar project or a solar leasing business: the current GITA Project Tier 3 and GITE windows close for MIDA applications on 31 December 2026, and the annex proposes nothing to replace them. If the project is ready, file before then.

If you are buying machinery, ICT equipment or software: the ACA continues without a gap. The incurred date decides the year of claim, not the window.

If you are drawing a foreign currency facility from a Malaysian bank: executing on or after 1 January 2027 caps the duty at RM2,000 or RM5,000, against 0.5% today.

If you would like help mapping these dates to your own basis period, or working out whether a company in your group meets the MSME tests, we can work through it with you.

Sources: Ministry of Finance, Budget 2027 tax measures annex (Appendices 1 to 36), published with the Budget 2027 speech of 9 October 2026; Inland Revenue Board of Malaysia (HASiL), Public Ruling No. 8/2025, Tax Treatment for Micro, Small and Medium Companies, 22 December 2025; HASiL announcements index, including the 8 October 2026 public consultation on a proposed Public Ruling on Accelerated Capital Allowance and the 2 October 2026 Public Ruling No. 4/2026; Parliament of Malaysia, Dewan Rakyat bills list; MIDA announcements index. All retrieved 13 October 2026. This article is general information current as at 13 October 2026 and is not tax or legal advice. Every measure described is a Budget proposal that takes effect only when the Finance Bill and the relevant orders are enacted, and the enacted terms may differ. Confirm the live position on mof.gov.my and hasil.gov.my before acting.