Malaysia´s Budget 2026

Malaysia’s Budget 2026 builds on the momentum of Budget 2025, reinforcing the nation’s pursuit of stronger economic fundamentals and sustainable resilience under the MADANI Economy framework. Tabled on 10 October 2025 by Prime Minister Dato’ Seri Anwar Ibrahim, it marks the first fiscal year of the 13th Malaysia Plan (2026 – 2030).

Anchored on the pillars of reform, growth, and rakyat wellbeing, the Budget 2026 focuses on high-growth sectors, digital expansion, and sustainable development, striking a balance between short-term support measures and long-term structural reforms to enhance Malaysia’s competitiveness and resilience.

Growth Perspective

The economy is projected to expand by 4.0 % - 4.8 % in 2025, moderating slightly to 4.0 % - 4.5 % in 2026, driven by robust private consumption and sustained public investment, with inflation expected to remain contained at 1.3 % - 2.0 %. Growth will be supported by strong performance in the construction (6.1 %) and services (5.2 %) sectors, alongside stable manufacturing growth (3.0 %). Domestic demand and investments – particularly in technology, utilities, energy, and transportation – will continue to be key catalysts for Malaysia’s medium-term economic expansion.

Tax Reforms

Guided by MADANI principles, Budget 2026 introduces targeted tax reforms, closure of tax loopholes, and incentives for green and digital economies, while fostering strategic investments and skills development to nurture an innovative, competitive, and future-ready Malaysia.

The key tax measures and policy highlights are summarized below:

The exemption on qualifying foreign-sourced income remitted to Malaysia will be extended until 31 December 2030, providing continued relief for taxpayers with overseas income.
The childcare fee relief will be expanded to include registered childcare centres for children up to 12 years old, together with a new relief for life insurance premiums or takaful contributions for children, effective from Year of Assessment (“YA”) 2026.
To support Visit Malaysia Year 2026, eligible tourism operators will enjoy a 100 % income tax exemption on incremental income for YA 2026 and YA 2027.
Profit distributions to individual partners of Limited Liability Partnerships (“LLPs”) exceeding RM100,000 will be subject to a 2 % tax rate, effective from YA 2026.
A 50 % additional tax deduction will be granted on qualifying expenditure for Artificial Intelligence (“AI”)-related training, available once every two years and subject to specified conditions. The incentive applies to applications submitted between 1 January 2026 and 31 December 2027.
The wage threshold for stamp duty exemption on employment contracts will be increased from RM300 to RM3,000 per month, effective for contracts executed from 1 January 2026.
Under the New Investment Incentive Framework, implementation will commence with the manufacturing sector in the first quarter of 2026, followed by the services sector in the second quarter of 2026, to encourage targeted and high-impact investments.

For further details, please kindly refer to our Malaysia Newsflash (October 2025).