Budget 2027: Tax measures to benefit M40, boost investment - audit firm

Budget 2027’s personal tax relief measures are expected to provide additional financial breathing room for middle-income earners (M40), while targeted incentives for businesses and investors could support investment growth, according to PwC Malaysia.

Its tax partner Michelle Chuo said the increase in personal tax relief from RM9,000 to RM12,000, the first adjustment since 2010, was timely amid continued cost-of-living pressures.

She said the higher relief, together with the one-percentage-point reduction in income tax rates for the M40, would provide additional disposable income for taxpayers in the group.

“Against the backdrop of continued cost of living pressures, the personal tax measures announced in Budget 2027 are a welcome move, particularly for the M40,” she told Bernama in response to the Budget 2027 tabled by Prime Minister Anwar Ibrahim on Friday.

The budget proposed a one-percentage-point reduction in tax rates for chargeable income between RM70,000 and RM150,000.

However, for high-income earners, the budget proposed raising the tax rate for chargeable income exceeding RM1 million to 30 percent from the current 28 percent.

READ MORE: Tax breaks for M40, higher levy for millionaires

Chuo said the higher personal relief would benefit taxpayers more broadly, but the savings for higher-income earners could be partly offset by the higher top marginal tax rate and the lower threshold at which it applies.

“For higher-income earners, the additional tax at the top end will progressively offset the savings from the higher relief and lower tax rates.

“This suggests a deliberate policy tilt towards directing more of the net tax benefits to middle-income taxpayers, while preserving the progressivity of the tax system,” she said.

Strengthening M’sia’s business appeal

On the corporate front, PwC Malaysia tax partner and private leader Fung Mei Lin said enhancements to the Global Services Hub incentive would strengthen Malaysia’s appeal as a regional base for multinational companies.

She said extending the scheme to treasury and fund activities, alongside withholding tax relief on interest and stamp duty exemptions for intercompany loan agreements, would provide stronger incentives for multinationals to establish regional treasury and financing functions in Malaysia, including under the (JS-SEZ) package.

“Together with the expatriate spouse working rights and the Malaysian Asean Business Entity (MyABE) initiative, it forms a coherent ‘invest, hire and grow here’ package,” she said.

READ MORE: Budget 2027: What's in it for you?

Fung also welcomed the extension of income tax exemptions for individual investors through equity crowdfunding (ECF) platforms and angel investors financing early-stage technology startups until end-2030.

She said the RM270 million allocation for SMEs, mid-tier companies and social enterprises through ECF and peer-to-peer (P2P) financing platforms would further support the startup financing ecosystem and help deepen the funding pipeline.

On green investments, Fung said the continued commitment to supporting the low-carbon transition, coupled with a more clearly defined scope of qualifying expenditure, could help channel incentives towards investments with greater impact.

Easing cash flow pressures

Meanwhile, she said the one-percentage-point reduction in the income tax rate for micro, small and medium enterprises (MSMEs), alongside a higher capital allowance threshold for businesses, would ease their cash-flow pressures.

Nonetheless, she said as the budget measures are legislated, businesses will welcome clear and practical guidance, including on how the incentives interact with global minimum tax rules, so that the benefits intended for investors are fully realised.

Fung also called for careful consideration of the Reinvestment Allowance review, which has supported manufacturers and other businesses investing in Malaysia for decades, saying a more targeted design should preserve industrial competitiveness while providing clear eligibility criteria and transitional arrangements.

“As the review progresses, we would encourage early engagement with the industry on the eligibility criteria and how the incentive is delivered,” she said.

Fung welcomed the introduction of a Multi-Family Office (MFO) model in Forest City alongside the existing Single Family Office (SFO) scheme, saying it could broaden Malaysia’s wealth management industry, attract families with different asset sizes and create demand for local fund managers, trustees, accountants and legal professionals.

She said clear guidance on licensing, tax treatment, substance requirements, and how the MFO and SFO schemes interact would be important to attract participants and establish Malaysia as a trusted wealth management centre.

Overall, she said Budget 2027 demonstrated that fiscal discipline and growth support could complement each other, but timely legislation and clear implementation guidance would be crucial to translating policy incentives into tangible outcomes.

“Certainty is what turns incentives into reality,” Fung said.

- Bernama

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