Tax cut for small enterprises helps remove ‘key barrier’ to growth

Prime Minister Anwar Ibrahim said the tax cut was proposed in response to concerns from SME entrepreneurs facing rising operating costs. PETALING JAYA: The tax reductions for micro, small, medium enterprises (MSMEs) address rising costs, which remain a key barrier to growth, says one of the world's largest professional accounting bodies.

“Tax relief, together with expanded financing support, should improve cash flow and strengthen the ability of MSMEs to invest and expand their business,” CPA Australia's tax committee member Tai Lai Kok said in a statement.

Earlier today, Prime Minister Anwar Ibrahim said the government would reduce income tax rates for MSMEs by 1% next year, when tabling the 2027 budget.

Under the budget, the tax rate on the first RM150,000 of chargeable income will be reduced to 14%, while the rate for chargeable income between RM150,000 and RM600,000 will be lowered to 16%.

The tax cut was proposed in response to concerns from SME entrepreneurs facing rising operating costs, Anwar said.

Separately, the government’s decision to increase individual income tax relief and lower tax rates for selected middle-income earners could help improve disposable income at a time when many households continue to face cost of living pressures.

CPA Australia's tax committee chair Surin Segar said the announced tax measures recognised “that taxpayers need support in managing the rising cost of living”.

"The increase in individual income tax relief from RM9,000 to RM12,000 is a welcome revision, particularly as the limit has remained unchanged since 2010."

PwC Malaysia praises enhanced Global Services Hub incentive

Meanwhile, professional services firm PwC Malaysia tax leader Steve Chia said the 2027 budget channelled savings from targeted subsidy reforms and stronger revenue collection back to the rakyat and businesses while maintaining fiscal discipline.

He said the additional revenue would help fund tax cuts, even as fuel subsidies are expected to remain high at RM40 billion amid ongoing geopolitical uncertainties, Bernama reported.

“Federal revenue for 2026 is now projected at RM363.6 billion, RM20.5 billion above the original estimate of RM343.1 billion and is expected to rise further to RM380.8 billion in 2027.

“Therefore, I welcome the progressive design of these measures. Relief goes mainly to the middle-income and SME segments, while the tax rate for those earning above RM1 million is adjusted to 30%,” he said in a statement.

He said the standout measure of the budget is the enhanced Global Services Hub incentive, which offers a 5% special tax rate for up to 30 years, three times the current maximum, or twice what the Johor-Singapore Special Economic Zone equivalent offers.

“This gives groups the long-term certainty to locate regional headquarters, shared services, and treasury centres in Malaysia.”

Meanwhile, Wong & Partners described the budget as broadly pro-investment and pro-productivity, with the strongest direct tax benefits directed at MSMEs, strategic investors and companies investing in automation, digitalisation and green assets.

The law firm said allowing manufacturers to reclaim sales tax paid on machinery, spare parts and equipment acquired from local traders or distributors is one significant proposal in the budget, encouraging purchases to be made from local distributors and businesses.