Five Mln M40 Taxpayers Could Save Up To RM1,600 Under Budget 2027 - KPMG Malaysia
By Niam Seet Wei
KUALA LUMPUR, Oct 10 (Bernama) -- The increase in individual tax relief, coupled with the one-percentage-point reduction in income tax rates for the middle-income group (M40) proposed in Budget 2027, could provide additional disposable income of up to RM1,600 for roughly five million taxpayers, says KPMG Malaysia.
Describing the measures as meaningful for the M40, KPMG Malaysia head of tax Soh Lian Seng said those in the group can sometimes find themselves in a difficult position, as they may not qualify for some forms of targeted assistance, yet face the same pressures from household expenses and rising living costs.
“For the M40, the increase in individual tax relief from RM9,000 to RM12,000 is particularly welcome. It is a practical way of putting some money back into their pockets,” he told Bernama in response to the Budget 2027 tabled by the Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim in Parliament on Friday.
According to Anwar, the tax relief adjustment will be the first revision since 2010.
The budget also proposed a one-percentage-point reduction in tax rates for chargeable income between RM70,000 and RM150,000.
For micro, small and medium enterprises (MSMEs), Soh said the one-percentage-point reduction in income tax rates is also significant, as every ringgit retained can contribute towards cash flow, wages, digitalisation, technology investment or expansion, especially when businesses are dealing with higher operating and compliance costs.
He said under the measure, the tax rate on the first RM150,000 of chargeable income will be reduced to 14 per cent, while the rate for chargeable income between RM150,000 and RM600,000 will fall to 16 per cent.
“The government estimates that about 300,000 businesses could benefit, with tax savings of up to RM6,000,” he added.
Soh also welcomed the measures directed at investment and competitiveness for larger businesses and investors in the budget.
For instance, he said the incentives for Global Services Hubs (GSHs), green investments and early-stage technology businesses send an important signal that Malaysia wants to attract higher-value activities and encourage businesses to invest for the longer term.
“The extension of green incentives to 2030 is particularly important, because investment decisions in areas such as renewable energy, energy efficiency and electric vehicle (EV) infrastructure require a longer planning horizon,” he said.
Several business-friendly measures were also proposed in the budget, including a special five per cent tax rate on income from GSH activities for new companies, effective Jan 1, 2027.
Income tax exemptions for individual investors investing through equity crowdfunding platforms and angel investors financing early-stage technology start-ups will also be extended until Dec 31, 2030.
The government will also extend green tax incentives, which were due to expire on Dec 31, 2026, until the end of 2030, offering up to 100 per cent investment tax allowances for green projects and EV charging stations.
It also proposed that companies purchasing green technology assets for their own use be eligible for investment tax allowances of up to 100 per cent.
Overall, Soh said the budget seeks to balance relief today with reform for tomorrow.
“If I were to summarise the tax measures, they appear to be doing three things: putting some money back into the hands of taxpayers, giving MSMEs some breathing space, and using targeted incentives to encourage investment in areas that Malaysia wants to grow,” he said.
However, he stressed that simplicity and certainty remain key priorities, as businesses navigate e-Invoicing, expanded sales and service tax (SST) requirements and increasingly digital tax administration.
As the tax system becomes more sophisticated, compliance should become easier rather than more complicated, he said.
Moving forward, Soh said the next phase of tax reform should focus not only on revenue generation but also on simplifying tax rules, reducing compliance costs and leveraging digitalisation to encourage voluntary compliance.
“That will be important in strengthening Malaysia's competitiveness and building a more sustainable tax system,” he said.
-- BERNAMA