Malaysia SME Tax 2027: Proposed 14% and 16% Rates with RM150k–RM600k Examples

Updated 14 October 2026. Budget 2027 proposes a one-percentage-point reduction in Malaysia's qualifying MSME corporate income tax rates. On the first RM150,000 of chargeable income, the proposed rate is 14% instead of 15%. On the next band up to RM600,000, it is 16% instead of 17%. The rate above RM600,000 remains 24% under the announced proposal.

The headline “save up to RM6,000” is useful, but only if you understand that these are progressive bands applied to chargeable income, not to sales revenue or all of an SME's accounting profit. Final application depends on legislation, the relevant year of assessment and LHDN rules.

Malaysia's proposed SME tax bands

Each slice of taxable income is charged at its applicable band rate. Reaching the second band does not mean the full income is taxed at 16%.

Worked examples: RM150k, RM300k and RM600k

Assume the business qualifies for the preferential SME corporate rates, has exactly the stated chargeable income and no other adjustments. These figures illustrate the proposal—not a confirmed future assessment:

For RM300,000 of chargeable income, the old calculation is RM150,000 × 15% + RM150,000 × 17% = RM48,000. The proposed calculation is RM150,000 × 14% + RM150,000 × 16% = RM45,000, yielding a RM3,000 illustrative difference.

At RM750,000 of chargeable income, the slice above RM600,000 remains taxed at 24% under this proposal; the change in the first two bands would still amount to RM6,000, assuming all other rules remain the same.

Is this for every SSM-registered business?

No. Tax status and eligibility depend on the business's legal form and other conditions.

Sdn Bhd

Companies seeking preferential SME rates should examine LHDN's requirements. The general published thresholds include paid-up ordinary share capital not exceeding RM2.5 million and gross business income not exceeding RM50 million, subject to shareholding, group and other restrictions. An SSM registration alone is not sufficient.

Enterprise / sole proprietor

A sole proprietor's business income is generally assessed under the owner's individual tax framework, not automatically at the Sdn Bhd corporate SME rates.

LLP

Limited liability partnerships have their own tax treatment and qualifying conditions. Check the rules that apply to the actual entity and assessment year instead of assuming every MSME receives identical treatment.

Revenue is not chargeable income

These terms should not be used interchangeably:

• Revenue: sales made by the business.
• Accounting profit: financial performance after accounting expenses.
• Chargeable income: tax-computed amount after permitted adjustments, reliefs or allowances.

A business earning RM600,000 in annual revenue may have far less chargeable income. Conversely, accounting profit can differ from chargeable income because capital allowances, non-deductible expenses and allowable losses require tax adjustments.

Your accountant should work from actual financial statements and tax computations, not a percentage of cash deposits.

What about software, computers and equipment?

Budget 2027 also proposes lifting the value threshold for an individual qualifying small-value asset to RM3,000. Certain accelerated capital allowance arrangements for qualifying domestic machinery, ICT equipment and software are also proposed for extension through 31 December 2030.

Do not mistake these deductions for a direct refund of the purchase price. And do not automatically classify subscriptions as assets: software licences, ongoing services and equipment purchases can require different accounting and tax treatment.

Five practical steps for business owners

1. Confirm the legal entity and its eligibility for preferential SME rates.
2. Calculate realistic chargeable income, not simply turnover.
3. Separate employee costs, recurring subscriptions and capital purchases.
4. Model the tax effect on future cash flow using multiple income scenarios.
5. Wait for enacted rules and updated LHDN guidance before finalising filings.

FAQ

Does every SME get RM6,000?

No. That is the maximum illustrative difference across the first RM600,000 bands for qualifying businesses. Smaller chargeable income produces a smaller difference.

Does a loss-making company receive RM6,000 cash?

No. This is a proposed tax-rate reduction, not an automatic cash grant.

Is the RM3,000 asset threshold an annual equipment budget?

No. It is a proposed per-item qualifying value threshold, subject to other allowance rules—not a cap on what a company can buy.

The takeaway

For a small-business owner, the right questions are: Do we qualify? What is our chargeable income? How much does the tax bill actually change? The Budget proposal matters when those answers are grounded in your company's records.

Official sources: MOF Budget 2027 · LHDN company tax rates · LHDN SME requirements