What did Budget 2026 change for Malaysian SMEs?
Budget 2026 (tabled 10 October 2025) left income tax rates unchanged but added an extra 50% deduction for recognised AI and cybersecurity training for SMEs, a green asset allowance, stamp duty relief for low-paid employment contracts, an 8% stamp duty on residential transfers to non-citizens, and full e-invoicing and stamp duty self-assessment in 2026.
Budget 2026 was tabled on 10 October 2025. According to the Budget speech, the main items for SMEs were:
Tax incentives and deductions
- An extra 50% tax deduction for SMEs on AI and cybersecurity training costs recognised by the National AI Council for Industry (NAICI).
- A 100% allowance on own-use green assets for companies using locally made green technology carrying the MyHIJAU Mark.
- Tourism project operators renovating business premises: a tax deduction on qualifying spending of up to RM500,000.
- A special deduction of 10% of qualifying cost, capped at RM10 million, for converting commercial buildings to residential use.
- 100% income tax exemption on statutory income for new food-production projects (10 years) and for expansion projects by existing companies (five years).
Stamp duty
- Employment contracts: exemption threshold up from RM300 to RM3,000 monthly wages from 1 January 2026.
- Small-value insurance and takaful exemption extended for three years.
- Residential property transfers to non-citizens and foreign companies: flat duty up from 4% to 8% from 1 January 2026, permanent residents excluded.
Compliance
- E-invoicing implemented fully from 2026, together with a stamp duty self-assessment system.
- Faster refunds of overpaid tax.
Rates: the speech did not announce a change to company or SME tax rates.
These are the measures as announced. Conditions are set in the Finance Act, exemption orders and LHDN guidance, so check the final text before relying on one.
Legal basis
- Budget 2026 speech (10 October 2025)
Sources
Applies to YA 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What is the corporate tax rate for a small company in Malaysia?A Malaysian resident company normally pays 24% income tax. A company that meets the SME conditions pays 15% on the first RM150,000 of chargeable income, 17% on the next RM450,000 (up to RM600,000), and 24% on anything above that.
- What conditions must my company meet to get the SME tax rates in Malaysia?To use the lower 15%/17% rates, the company must be resident, have ordinary paid-up capital of RM2.5 million or less, and gross business income of RM50 million or less. It must also pass the related-company test and, from YA 2024, a foreign-ownership test.
- Does a dormant company with no income still have to file a tax return in Malaysia?Yes. LHDN says companies that are dormant or have not started business must still register a tax file and file returns. A nil return tells LHDN there is no taxable income, and failing to file can be an offence even when no tax is due.
- What is the Year of Assessment and how does it relate to my financial year?The Year of Assessment (YA) is the calendar year in which your company's accounting year (the basis period) ends. A company with a financial year ending 30 June 2025 reports that income in YA 2025.
- How do I file Form C through MyTax e-Filing?Form C is filed online through LHDN's MyTax portal using the company's tax number and login. You complete the company return, attach no paper, submit, and keep the confirmation. Manual paper submission is no longer accepted for companies.