Siena:The income tax rate for micro, small, and medium enterprises (MSMEs) is set to be revised, introducing a one percentage point reduction for the two lowest taxable income bands, starting from the 2027 assessment year.

According to BERNAMA News Agency, the Ministry of Finance (MoF) outlined 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. For the taxable income range of RM150,001 to RM600,000, the tax rate is suggested to drop from 17 percent to 16 percent, while the rate for income exceeding RM600,000 will remain at 24 percent.

The ministry stated that this proposal aims to enhance the competitiveness of SMEs to boost the country's economic growth. Additionally, the MoF mentioned that capital allowances for small-value assets not exceeding RM2,000 per asset are currently allowed to be claimed in full, limited to RM20,000 per year of assessment.

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

Furthermore, the overall capital allowance limit for such assets eligible for claim by companies other than MSMEs is proposed to rise from RM20,000 to RM30,000 per year of assessment. These proposed changes are expected to come into effect from the year of assessment 2027, as noted by the MoF.