KUALA LUMPUR, 9 October 2026 – Baker Tilly Malaysia welcomes Budget 2027’s focus on strengthening business competitiveness, supporting micro, small and medium enterprises (MSMEs), encouraging investment in strategic industries and accelerating digitalisation, as Malaysia continues to position itself for sustainable and inclusive economic growth. It continues its theme of also caring for the under-privileged and needy segments of society.
Andrew Heng, Group Managing Partner of Baker Tilly Malaysia, said the Budget’s measures could help businesses navigate a changing economic environment, improve productivity and pursue new growth opportunities. “Businesses today need more than access to financing. They need the right capabilities, sound governance and a clear strategy to remain competitive and grow sustainably. Budget 2027’s focus on supporting enterprises, particularly the MSME and SME sector, encouraging higher-value investments and accelerating technology adoption is timely. The effectiveness of these measures will ultimately depend on how well they are implemented and translated into tangible benefits for businesses,” he said.
Lower tax rates provide support for MSMEs and Middle-Income groups
Anand Chelliah, Managing Partner for Tax at Baker Tilly (Malaysia), welcomed the proposed reduction in income tax rates for micro, small and medium enterprises (MSMEs), describing it as a meaningful measure to help businesses manage operating costs and strengthen their financial position.
Under Budget 2027, the income tax rate on the first RM150,000 of chargeable income for eligible MSMEs will be reduced to 14%, while the rate on chargeable income between RM150,000 and RM600,000 will be lowered to 16%. The Budget estimates that the reduction will provide additional income of up to RM6,000 to approximately 300,000 MSMEs. Certain reliefs and allowances were also announced for expenditures undertaken by MSME’s.
“MSMEs are an extremely important part of Malaysia’s economic engine, contributing significantly to economic activity and employment. Reducing the tax burden can help eligible businesses retain more of their earnings, strengthen cash flow and create greater capacity to reinvest in their operations.
“The longer-term opportunity is for businesses to use these savings productively, whether to invest in equipment and technology, develop their workforce, improve operational efficiency or expand into new markets. However, more needs to be done in develop the full potential of this vital sector of our economy.”
Anand also noted that personal tax rates at the middle-income group level is proposed to be reduced slightly and this was done at the expense of the high-income group which saw an expansion of the chargeable income band from 28% to 30% for income above RM1 million.Supporting the transition to a high-value & greener economy
Anand welcomed the measures and support proposed for attracting world-class companies and talent to locate their operations and resources in Malaysia through a expansion of tax incentives and ease of working permit restrictions. This is crucial in the context of moving Malaysia up the higher income and productivity chain.
Also noteworthy are the proposals for companies undertaking green technology projects and operating electric vehicle charging stations may be eligible for investment tax allowances of up to 100%. Similar allowances of up to 100% are proposed for companies purchasing green technology assets for their own use.
“Extending these incentives provides businesses with a longer planning horizon for investments in green technology and sustainability. This is particularly relevant for companies evaluating the cost of upgrading equipment, improving energy efficiency or incorporating cleaner technologies into their operations.
“Businesses should assess the potential benefits alongside the commercial viability of their proposed investments and ensure that they meet the relevant qualifying criteria. When supported by sound investment planning, tax incentives can help make the transition to more sustainable business practices more viable.”
Supporting capital market access and regional expansion
Budget 2027 also highlights measures to broaden access to capital markets, including cooperation between the Securities Commission Malaysia and Hong Kong regulators to facilitate dual listings for Malaysian companies, alongside matching grants to help eligible companies defray listing costs.
Dato’ Lock Peng Kuan, Managing Partner for Audit & Assurance at Baker Tilly (Malaysia), said these initiatives could create new opportunities for Malaysian businesses to access capital, expand their investor base and pursue their next phase of growth.
“Access to capital markets can be a significant catalyst for business growth, but a successful listing requires preparation well before a company enters the market. Businesses need sound financial reporting, robust internal controls, strong corporate governance and the ability to meet ongoing regulatory and disclosure requirements.
“Measures that facilitate access to domestic and international capital markets are encouraging. Equally important is helping companies build the right foundations to become investment-ready and sustain investor confidence beyond listing day. With the right preparation, businesses can approach the IPO journey with greater clarity and position themselves for long-term growth.”
Building a competitive and future-ready economy
Andrew said the Budget’s measures should be viewed as part of a broader effort to strengthen the foundations of Malaysia’s economy, from supporting domestic enterprises to encouraging innovation and developing higher-value industries.
“As artificial intelligence and digitalisation reshape industries, businesses will need to continue investing in their people, processes and capabilities. The opportunity is not simply to adopt new technology, but to use it to improve productivity, strengthen decision-making and develop new sources of value.
“Malaysia’s ability to compete in the years ahead will depend on how effectively businesses embrace innovation while maintaining strong governance, sound financial management and the confidence of their stakeholders.”He added that the effectiveness of Budget 2027 would ultimately depend on how successfully its measures translated into stronger businesses, better employment opportunities and more resilient economic growth.
“Long-term competitiveness requires more than investment incentives or short-term assistance. It calls for businesses that are financially sound, well governed, productive and prepared to adapt to changing market conditions.
“At Baker Tilly Malaysia, we remain committed to supporting businesses through their growth journey, helping them navigate regulatory and commercial challenges, strengthen their capabilities and build the foundations for sustainable success.”
