Kuala Lumpur:The income tax rate for micro, small, and medium enterprises (MSMEs) is proposed to be revised, with a one percentage point reduction for the two lowest taxable income bands, effective from the 2027 assessment year.

According to BERNAMA News Agency, the Ministry of Finance (MoF) detailed in the Budget Tax Measures 2027 document that the income tax rate for the first RM150,000 taxable income band is proposed to decrease from 15 percent to 14 percent. Additionally, the tax rate for the taxable income range of RM150,001 to RM600,000 is proposed to be reduced from 17 percent to 16 percent, while the tax rate for taxable income exceeding RM600,000 will remain at 24 percent.

The ministry stated that this proposal aims to boost the competitiveness of SMEs to spur the country's economic growth. Furthermore, the MoF indicated that capital allowances for small-value assets not exceeding RM2,000 per asset can be fully claimed, up to a limit of RM20,000 per year of assessment.

MSMEs will be eligible to fully claim capital allowance on small-value assets without any limit on the overall annual claim. To help companies reduce business costs by considering current equipment and fitting prices, the value of each small-value asset for capital allowance claims is proposed to increase from RM2,000 to RM3,000.

Additionally, the overall capital allowance limit for such assets eligible for claim by companies other than MSMEs is proposed to increase from RM20,000 to RM30,000 for each year of assessment. These proposed improvements are expected to take effect from the 2027 assessment year, according to MoF.