Targeted measures expect to create a wider multipler effect, translating support for people and businesses into broader economic benefits
Petaling Jaya, 9 October 2026 – Budget 2027 marks the next phase of Malaysia’s reform journey. After several years focused on fiscal repair, subsidy rationalisation and structural reforms, the Government is now translating these reforms into tangible benefits for households while maintaining its focus on business competitiveness and long-term growth. The Budget seeks to strike a careful balance between easing cost-of-living pressures, supporting businesses and maintaining fiscal discipline, with the fiscal deficit projected to narrow from 3.6% of GDP in 2026 to 3.3% in 2027. Beyond personal tax reliefs and targeted household assistance, it also prioritises infrastructure development, productivity, business competitiveness and more balanced regional growth, signalling a shift towards translating the MADANI agenda into broader economic and social outcomes.
“If I had to describe Budget 2027 in one word, it would be ‘inclusive’. There is something for almost every segment of society and the business community, from tax relief to ease the rakyat’s financial burden to measures supporting businesses, particularly SMEs and MSMEs. At the same time, the Government is strengthening tax compliance, reflecting the need to balance relief and incentives with sustainable revenue collection. More broadly, the Budget reflects the Government’s intention to ensure that economic growth translates into meaningful outcomes for the rakyat through higher incomes, stronger businesses, better employment opportunities and more balanced regional development,” said Mr. Soh Lian Seng, Head of Tax at KPMG in Malaysia.
Support for middle-income (M40) households remains a key feature of Budget 2027, with measures aimed at easing financial pressures and strengthening household resilience. These include an increase in individual tax relief from RM9,000 to RM12,000 and expanded reliefs for medical treatment, caregiving expenses, education, skills development and lifestyle expenses. The enhanced tax reliefs could provide additional support to M40 households, particularly the sandwich generation, who often balance daily expenses with children’s education and the care of ageing parents. The emphasis on these areas also reflects recommendations previously highlighted by KPMG in its Budget 2027 memorandum and pre-budget engagements with the authorities.
Budget 2027 also places SMEs and MSMEs at the heart of Malaysia’s economic agenda. Beyond the reduction in corporate tax rates for eligible businesses, the Budget introduces a range of practical measures aimed at improving cash flow, encouraging reinvestment and enhancing productivity. Measures such as the higher qualifying value for small-value assets for capital allowance purposes, the extension of accelerated capital allowances for qualifying plant and machinery as well as ICT equipment and software, and stamp duty concessions for certain SME financing arrangements can support business expansion and capital investment.
Importantly, Budget 2027 also reflects a shift towards raising incomes rather than relying solely on direct assistance. The increase in the minimum wage, enhanced support for gig workers and broader efforts to strengthen workforce participation indicate a policy focus on improving earning capacity and long-term household resilience. While these measures may increase labour costs for some businesses, they also have the potential to strengthen household purchasing power, stimulate domestic demand and support business growth. With the right balance between wage growth, productivity and business competitiveness, these measures can help create a more sustainable cycle of rising incomes, stronger consumption and economic growth.
The enhancement of the Global Services Hub (GSH) incentive is a notable development for Malaysia's investment landscape. In addition to maintaining an attractive tax framework for new investors, the Government has enhanced the regime by extending the incentive period, introducing a preferential 5% tax rate for qualifying incremental income earned by existing Principal Hub and GSH companies, and providing additional withholding tax and stamp duty exemptions for qualifying treasury and financing activities. These enhancements are designed not only to attract new regional operations, but also to encourage companies already established in Malaysia to expand their activities, undertake higher-value functions and deepen their regional footprint from Malaysia.
Coupled with the extension of these benefits to qualifying activities within the Johor-Singapore Special Economic Zone (JS-SEZ), the measures further strengthen Malaysia's attractiveness as a location for regional headquarters, shared services, treasury and other high-value business functions. This reflects the Government's broader ambition to position Malaysia as a competitive hub for services, innovation and cross-border business operations
"Budget 2027 marks an important shift from laying the foundations for reform to delivering broader economic and social impact. As Malaysia enters its next phase of growth, the focus must be on raising productivity, strengthening business competitiveness and creating higher-value opportunities that translate into better jobs, stronger incomes and improved living standards. Ultimately, the Budget’s success will be reflected in how effectively its measures create greater opportunities, deliver meaningful benefits for households and businesses, and support sustainable growth for the country,” added Mr. Soh.
For more insights, visit kpmg.com.my/nationalbudget.