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Highlights of Malaysia Budget 2026 on 10 October 2025

On 10 October 2025, Dato’ Seri Anwar bin Ibrahim, Prime Minister cum Finance Minister has tabled Budget 2026. The following is the summary of the tax measures for Malaysia Budget 2026.

Table of Contents hide
1 Highlights of Malaysia Budget 2026 on 10 October 2025
1.1 Personal Tax
1.2 Corporate Tax
1.3 Indirect Tax
1.4 Stamp Duty
1.5 Tax Incentives

Personal Tax

  • Imposition of Tax on Profit Distributions from Limited Liability Partnerships (LLP)
    • Proposal: A 2% tax will be imposed on chargeable income from profit distributions from an LLP that exceed RM100,000 annually for both resident and non-resident individual partners. This is designed to align the income tax treatment of LLP partners with the dividend tax for individual shareholders of a company.
    • Effective Date: From Year of Assessment (YA) 2026.
  • Expansion of Tax Relief for Medical Expenses
    • Proposal: The existing tax relief of up to RM10,000 for medical expenses for self, spouse, and child is expanded to cover all vaccines registered and approved by the Ministry of Health’s National Pharmaceutical Regulatory Agency. The relief for expenses related to assessment, diagnosis, early intervention, and rehabilitation for children with learning disabilities aged 18 and below will be increased from RM6,000 to RM10,000.
    • Effective Date: From YA 2026.
  • Tax Relief on Entrance Fees to Tourist Attractions and Cultural Programmes
    • Proposal: A tax relief of up to RM1,000 will be provided for entrance fees to tourist attractions (like museums, theme parks, and zoos) and cultural/art programs.
    • Effective Date: From YA 2026.
  • Expansion of Tax Relief for Environmental Sustainability and Home Safety
    • Proposal: The current relief of up to RM2,500 for electric vehicle charging facilities and food composting machines is expanded to include household food waste grinders and Closed-Circuit Television (CCTV) for home use. This relief can be claimed once within two YAs.
    • Effective Date: For YAs 2026 and 2027.
  • Expansion of Tax Relief for Child Care Centre Fees
    • Proposal: The RM3,000 tax relief for childcare fees is expanded to include registered daily care centres and after-school transit centres for children up to 12 years old.
    • Effective Date: From YA 2026.
  • Expansion of Tax Relief for Life Insurance
    • Proposal: The tax relief of up to RM3,000 for life insurance premiums or takaful contributions for self, spouse, and husband is expanded to include children. Eligibility criteria apply based on the child’s age and student status.
    • Effective Date: From YA 2026.
  • Tax Deduction on Donations to National Museum
    • Proposal: Individuals can claim a tax deduction for cash contributions made to the “Akaun Amanah Jabatan Muzium Malaysia.”
    • Effective Date: To be announced.

 

Corporate Tax

  • Review of Tax Exemption on Foreign-Sourced Income (FSI)
    • Proposal: The tax exemption on FSI (dividends, and gains from disposal of capital assets) for resident companies and LLPs is proposed to be extended for four years, from January 1, 2027, to December 31, 2030. The scope is also expanded to include cooperative societies and trust bodies.
    • Effective Date: From January 1, 2027 to December 31, 2030.
  • Review of Income Tax Deduction for Listing on Bursa Malaysia
    • Proposal: The tax deduction of up to RM1.5 million for listing expenses is extended for another five years, from YA 2026 to YA 2030. The scope is also expanded to include Micro, Small and Medium Enterprises (MSMEs) in the energy and utilities sectors.
    • Effective Date: From YA 2026 to YA 2030.
  • Extension of Income Tax Exemption for Social Enterprises
    • Proposal: The application period for income tax exemption for accredited social enterprises is extended for three years.
    • Effective Date: For applications received from January 1, 2026, to December 31, 2028.
  • Introduction of Carbon Tax
    • Proposal: Malaysia will introduce a carbon tax in 2026, starting with the iron, steel, and energy sectors.
    • Effective Date: To be announced.
  • Tax Deduction on Renovation and Conversion of Commercial Buildings
    • Proposal: A special tax deduction of 10% on qualifying expenses, capped at RM10 million, is proposed for the renovation and conversion of commercial buildings into residential premises.
    • Effective Date: To be announced.

 

Indirect Tax

  • Increase in Excise Duty Rates on Tobacco and Alcoholic Beverages
    • Proposal: Excise duty rates on cigarettes will be increased by 2 sen per stick, while duties on cigars, cheroots, and cigarillos will increase by RM40 per kilogram. Heated tobacco products will see a duty increase of RM20 per kilogram of tobacco content. Excise duty rates on alcoholic beverages will be increased by 10%.
    • Effective Date: November 1, 2025.
  • Extension of Import Duty and Sales Tax Exemptions on Nicotine Replacement Therapy (NRT) Products
    • Proposal: The import duty and sales tax exemptions on nicotine gum and patches are extended until December 31, 2027. The exemption is also expanded to include nicotine mist and lozenges.
    • Effective Date: For applications received from October 11, 2025, to December 31, 2027.
  • Limitation on Vehicle Tax Exemption in Langkawi and Labuan
    • Proposal: Vehicle tax exemptions in Langkawi and Labuan are limited to vehicles with a value not exceeding RM300,000. This measure aims to prevent misuse by vehicle owners who take advantage of the 90-day-a-year rule for leaving duty-free zones.
    • Effective Date: January 1, 2026.

 

Stamp Duty

  • Review of Wage Threshold for Stamp Duty Exemption on Employment Contracts
    • Proposal: The wage threshold for stamp duty exemption on employment contracts is increased from RM300 to RM3,000 per month.
    • Effective Date: For employment contracts executed from January 1, 2026.
  • Extension of Stamp Duty Exemption for First Residential Home
    • Proposal: The full stamp duty exemption on transfer instruments and loan agreements for the purchase of a first residential home priced up to RM500,000 is extended for two years.
    • Effective Date: For sale and purchase agreements executed from January 1, 2026, to December 31, 2027.
  • Review of Stamp Duty on Property Ownership by Non-Citizens
    • Proposal: The fixed stamp duty rate on residential property transfers by non-citizen individuals (excluding Malaysian permanent residents) and foreign companies is increased from 4% to 8%.
    • Effective Date: For instruments of transfer of residential homes executed from January 1, 2026.
  • Extension of Stamp Duty Exemption for Perlindungan Tenang Products
    • Proposal: The 100% stamp duty exemption for all Perlindungan Tenang products is proposed to be extended for 3 years. This measure aims to encourage more low- and middle-income individuals to obtain affordable insurance and takaful protection.
    • Effective Date: For Perlindungan Tenang policies and certificates issued from 1 January 2026 to 31 December 2028.
  • Extension of Stamp Duty Exemption on Insurance Policies or Takaful Certificates with Low Annual Premium/Contribution
    • Proposal: It is proposed that the 100% stamp duty exemption on these policies be extended for 3 years. This is intended to encourage more individuals and MSMEs to get basic insurance or takaful coverage.
    • Effective Date: For insurance policies and takaful certificates issued from 1 January 2026 to 31 December 2028.
  • Exemption of Stamp Duty on Contract Notes for Buy-Side Transaction of Structured Warrants
    • Proposal: To promote the growth and competitiveness of Malaysia’s capital market, a stamp duty exemption is proposed for contract notes related to buy-side structured warrant transactions. The exemption will be given for a period of 3 years.
    • Effective Date: For transactions executed from 1 January 2026 to 31 December 2028.
  • Extension of Stamp Duty Exemption on Contract Notes for Exchange Traded Funds (ETFs) Listed on Bursa Malaysia
    • Proposal: To further enhance the competitiveness of Malaysia’s capital market and encourage alternative investments, the stamp duty exemption on contract notes for ETFs transactions is proposed to be extended for 3 years.
    • Effective Date: For transactions from 1 January 2026 to 31 December 2028.

 

Tax Incentives

  • Tax Incentive for Training in Artificial Intelligence (AI)
    • Proposal: MSMEs can receive a further tax deduction of 50% once every two years for expenses incurred on AI training recognized by the MyMahir National AI Council for Industry (NAICI).
    • Effective Date: For applications received by TalentCorp from January 1, 2026, to December 31, 2027.
  • Tax Incentive for Organising International Events
    • Proposal: Organizers can receive a 100% income tax exemption on statutory income for international incentive trips, conferences, and trade exhibitions, provided they bring in a minimum number of foreign participants (1,500, 2,000, and 3,000 respectively).
    • Effective Date: For YAs 2026 and 2027.
  • Tax Incentive for Food Security Projects
    • Proposal: The tax incentive for food production projects is rebranded as “Tax Incentive for Food Security Projects.” The incentive for new projects is a 100% income tax exemption on statutory income for 10 years, and for expansion projects, it is a 100% exemption for 5 years. The exemption is limited to income from sales in the domestic market.
    • Effective Date: For applications received from January 1, 2026, to December 31, 2030.
  • Income Tax Exemption for the Sustainable and Responsible Investment (SRI) Sukuk and Bond Grant Scheme
    • Currently, issuers of Green SRI Sukuk can apply for a grant from the Securities Commission Malaysia (SC) to finance external review expenses. The grant covers 90% of these costs, up to a maximum of RM300,000. The income tax exemption for this grant is in effect from 1 January 2018 to 31 December 2025. The scheme has been rebranded as the SRI Sukuk and Bond Grant Scheme and includes financial instruments that conform to ASEAN Green, Social, and Sustainability Bond Standards.
    • Proposal: The proposal seeks to review the current tax exemption and enhance the grant scheme. The key changes are:
    • The grant allocation for external review expenses will be increased from 90% to 100%, while the maximum grant amount remains at RM300,000.
    • The scope of eligible financial instruments under the scheme will be expanded to include sukuk and bonds that conform to the ASEAN Taxonomy for Sustainable Finance.
    • The income tax exemption will be extended for an additional 3 years.
    • Effective Date: The effective date for these measures is for applications for the SRI Sukuk and Bond Grant Scheme received by the SC from 1 January 2026 to 31 December 2028.
  • Income Tax Deduction on Contributions for Integrity and Anti-Corruption Programmes/Activities
    • Current Position: As of 2021, a person with business income can claim a tax deduction under Section 34(6)(h) of the Income Tax Act 1967 for expenses incurred on integrity and anti-corruption programs. This is subject to several conditions, including collaboration with the Malaysian Anti-Corruption Commission (MACC), being apolitical, not-for-profit, and not being part of the company’s core activities.
    • Proposal: In line with the National Anti-Corruption Strategy (NACS) 2024-2028, it is proposed that anti-corruption education programs organized by Civil Society Organizations (CSOs) be approved as national interest projects under Section 44(11C) of the Income Tax Act 1967. Cash donations to these approved programs will be eligible for an income tax deduction, limited to 10% of aggregate income.
    • Effective Date: For applications received by the Ministry of Finance from 1 January 2026 to 31 December 2028.
  • Tax Treatment for Public University Teaching Hospitals Endowment Funds
    • Current Position: Endowment funds established by public universities are eligible for a tax deduction under Section 44(11D) of the Income Tax Act 1967. This applies to public universities under the Universities and University Colleges Act 1971 and Universiti Teknologi MARA. Donors are eligible for a tax deduction of up to 10% of their aggregate income, and the contributions received are exempt from income tax. The funds’ objectives must be followed, and only the income or returns generated can be used.
    • Proposal: To ensure the financial sustainability of public university teaching hospitals, it is proposed that they be allowed to establish endowment funds that receive the same tax treatment as public university endowment funds. Cash contributions to these funds will be eligible for tax deductions, provided the funds are managed solely by the teaching hospitals in line with prescribed guidelines.
    • Effective Date: From the Year of Assessment 2026.
  • Accelerated Capital Allowance on Capital Expenditure for Plant, Machinery, and ICT Equipment
    • Proposal: To promote domestic investment and accelerate digital technology adoption, it is proposed that companies can claim an Accelerated Capital Allowance (ACA). This allows for the expenditure to be fully claimed within two years. The ACA applies to the procurement of heavy, plant, and general machinery from local manufacturers, as well as the purchase of ICT equipment and computer software. It also includes consultation, licensing, and incidental fees for customized software development.
    • Effective Date: For qualifying capital expenditure incurred from 11 October 2025 to 31 December 2026.
  • Tax Incentive for Automation in the Agriculture Sector
    • Current Position: Tax incentives are provided for livestock farming activities, including a 100% Accelerated Capital Allowance (ACA) and a 100% income tax exemption on qualifying capital expenditure for the closed-house chicken rearing system. This incentive is for applications received by the Ministry of Agriculture and Food Security (KPKM) until 31 December 2025.
    • Proposal: To ensure the continuity of tax incentives for rearing chickens using the closed-house system, it is proposed that the tax incentive for automation in the agriculture sector be expanded to specifically include this activity.
    • Effective Date: For applications received by the KPKM from 1 January 2026 to 31 December 2027.
  • Extension of Tax Incentive for Commercialisation of R&D Findings
    • Current Position: Tax deduction is given to companies that invest in subsidiary companies commercializing non-resource-based R&D findings. The incentive was reintroduced in Budget 2021 and extended to include private higher education institutions for a period of five years, from 7 November 2020 to 31 December 2025.
    • Proposal: To drive national competitiveness and increase productivity, the tax deduction is proposed to be extended for another five years.
    • Effective Date: For applications received by the Malaysia Investment Development Authority (MIDA) from 1 January 2026 to 31 December 2030.
  • Tax Incentive for Tour Operators
    • Current Position: Previously, companies operating tourism packages received a 100% tax exemption on statutory income from both domestic and inbound tourism packages, subject to minimum tourist numbers. This incentive was available until the Year of Assessment (YA) 2022.
    • Proposal: To encourage tour operators during “Visit Malaysia Year 2026,” a new tax incentive is proposed. Tour operators will receive a 100% tax exemption on the incremental income from inbound tourism packages. This is subject to the condition that the operator brings in a minimum of 1,000 foreign tourists annually.
    • Effective Date: For YAs 2026 and 2027.
  • Tax Deduction on Costs of Renovation and Refurbishment for Tourism Projects
    • Current Position: Generally, expenses for renovation and refurbishment of business premises are not eligible for tax deductions.
    • Proposal: To encourage tourism project operators to upgrade their premises in line with “Visit Malaysia Year 2026,” a tax deduction is proposed. Tourism project operators registered with the Ministry of Tourism, Arts and Culture (MOTAC) will be allowed a tax deduction on qualifying renovation and refurbishment expenditure, up to a maximum of RM500,000.
    • Effective Date: For qualifying expenditure incurred from 11 October 2025 to 31 December 2027.
  • Tax Incentive for Organising Arts, Cultural, Sports and Recreational Activities
    • Current Position: Organizers of approved arts, cultural, and sports activities currently receive a 50% tax exemption on statutory income. This incentive is effective until YA 2025.
    • Proposal: The tax incentive is proposed to be extended for two years. The scope will be expanded to include tourism activities approved by MOTAC (excluding concert performances) and international sports and recreational competitions approved by the Ministry of Youth and Sports (KBS). The venue for these events will be broadened to include any location in Malaysia approved by MOTAC.
    • Effective Date: For YAs 2026 and 2027.
  • Review of Tax Incentive for Venture Capital
    • Current Position: Venture Capital Companies (VCCs) receive an income tax exemption on statutory income for 5 years from their first certification from the Securities Commission Malaysia (SC), subject to certain conditions.
    • Proposal: The tax incentives for venture capital will be revised and enhanced. A special tax rate of 5% will be imposed on all income of VCCs, except for interest from savings or deposits. This incentive will be provided for a period of 10 years or for the remaining life of the fund. A special tax rate of 10% will be imposed on the income of Venture Capital Management Companies (VCMCs). A tax exemption on dividends will be given to individual shareholders of VCCs at the first level.
    • Effective Date: From Year of Assessment (YA) 2025.
  • Review of Tax Incentive for Venture Capital
    • Current Position: Companies can claim a double tax deduction for scholarships provided to students pursuing technical and vocational training, as well as higher education, provided the student meets certain criteria such as being a Malaysian citizen, having no source of income, and their parents’ monthly income not exceeding RM10,000.
    • Proposal: The scholarship incentive will be reviewed and extended for five years. The household income requirement for the student’s parents or guardians will be increased to not exceeding RM15,000 per month. The scope of the double tax deduction is also expanded to include qualified professional certification courses.
    • Effective Date: From YA 2026 to 2030.
  • Tax Incentive for Training of Care Workers
    • Current Position: A double tax deduction is given to companies that sponsor training for persons with disabilities (OKU) who are not their employees.
    • Proposal: To address the need for quality care services, the scope of the double tax deduction will be expanded to include the sponsorship of care workers to undergo training programs in institutions recognized by the Ministry of Women, Family and Community Development (KPWKM). The sponsored care workers must not be employees of the company.
    • Effective Date: For YAs 2026 and 2027.
  • Review of Tax Incentive for Employing Vulnerable Persons
    • Current Position: A further tax deduction is given to employers who hire ex-convicts, former drug dependents, parolees, and supervised persons. This incentive was also extended to cover employment costs for current and former residents of Henry Gurney School and various rehabilitation and care centers. The incentive is in place until YA 2025.
    • Proposal: The tax incentive for employing vulnerable persons is proposed to be extended for another five years. The scope will be expanded to include the employment of Prisoners Released on Licence and drug/substance dependents and misusers undergoing treatment and rehabilitation under the Drug and Substance Dependants and Misusers (Treatment and Rehabilitation) Act 1983.
    • Effective Date: From YA 2026 to 2030.
  • Extension of Tax Incentive for Employing Senior Citizens
    • Current Position: A further tax deduction is provided to employers who hire senior citizens aged 60 and above, subject to certain conditions such as full-time employment and a monthly salary not exceeding RM4,000. This incentive is effective until YA 2025.
    • Proposal: To help senior citizens remain active and financially independent, the further tax deduction for employers who hire them is proposed to be extended for another five years.
    • Effective Date: From YA 2026 to 2030.
  • Accelerated Capital Allowance on the Cost of Purchasing Speed Limitation Devices for Heavy Vehicles
    • Current Position: The government has mandated the use of Speed Limitation Devices (SLDs) on heavy commercial vehicles to enhance road safety. The purchase of these devices is currently eligible for a standard capital allowance (20% initial, 10% annual).
    • Proposal: To support the installation of these devices, an Accelerated Capital Allowance (ACA) is proposed. This would allow a full claim within one year (20% Initial Allowance and 80% Annual Allowance) for the cost of purchasing SLDs, up to RM4,000 per unit. The incentive is limited to heavy vehicles manufactured before January 1, 2015, that are not already equipped with such devices.
    • Effective Date: For SLD installations carried out from 1 January 2026 to 31 December 2026.