MSME tax cut from YA2027: what it is worth and what to ask your tax agent

1 November 2026 · Analysis · Finance, tax & corporate

Budget 2027 proposes cutting MSME income tax to 14% on the first RM150,000 and 16% on RM150,001 to RM600,000 from YA2027, worth up to RM6,000 a year per company. Whether you qualify depends on paid-up capital, annual sales and group structure, so ask your tax agent to confirm your status and update your 2027 tax estimates once the Finance Bill is passed.

The proposal

Under the current rules, companies with ordinary paid-up capital of RM2.5 million or less (or LLPs with capital contributions of RM2.5 million or less) and annual sales of up to RM50 million pay 15% on the first RM150,000 of chargeable income, 17% on RM150,001 to RM600,000 and 24% above that. The Budget 2027 appendix proposes cutting the first two bands by one percentage point, to 14% and 16%, from the year of assessment 2027. The rate above RM600,000 stays at 24%.

The budget speech says this is worth up to RM6,000 a year for more than 300,000 MSMEs. That figure is simply one percentage point on RM600,000 of chargeable income, so a company earning less will save proportionally less.

Other changes worth noting

Small value assets: from YA2027 the per-asset limit for full capital allowance rises from RM2,000 to RM3,000. MSMEs already have no annual cap; for other companies the cap rises from RM20,000 to RM30,000.
Accelerated capital allowances on locally made machinery, ICT equipment and software packages are extended to 31 December 2030.
From YA2028, companies other than MSMEs would only be able to deduct salaries paid through financial institutions or approved cashless instruments.

What to ask your tax agent or accountant

These are budget proposals and take effect only once the Finance Bill is passed, which usually happens after the Supply Bill. The practical work is to check eligibility and adjust estimates rather than change plans immediately.

Do we meet the MSME conditions for YA2027, including any group or related-company rules that can exclude us?
How should we revise our CP204 tax estimate once the new rates are law?
Which planned purchases might qualify under the higher small value asset limit?
If we are not an MSME, are all salaries already paid through bank transfer ahead of YA2028?

Bottom line

For a typical profitable SME the saving is modest but real, and the bigger risk is assuming you qualify when you do not. A short eligibility check with your tax agent, plus a note in your company secretary file of your paid-up capital and sales for the year, will make the YA2027 return simpler.

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Sources

Budget Speech 2027 (with tax measures appendices) — Ministry of Finance Malaysia
Dewan Rakyat passes Budget 2027 at policy stage — The Edge Malaysia

Editorial summary written by Best Malaysia Services. Not legal, tax or financial advice; check the original sources.