Malaysia budget 2026: The people’s budget
The 2026 Malaysian budget sets another spending record with a total allocation of MYR 470 billion (MYR 1,000 = approximately USD 238). The budget aims to further strengthen fiscal discipline, sustain growth, and increase living standards, while at the same time attempting to narrow the fiscal deficit to 3.5% of GDP. Ecovis provides an overview of the measures.
Unveiled on 10 October 2025 by Prime Minister and Finance Minister Anwar Ibrahim, the 4th Madani Budget 2026 has been called the “People’s Budget” under the Ekonomi MADANI framework, which emphasises inclusivity, resilience, and shared prosperity.
In total, the budget outlines a total of nine measures:
- Honing excellence in governance
- Serving the people’s priorities
- Championing high-value economy
- Driving “Made by Malaysia” products
- Strengthening national resilience
- Bridging the gap, creating opportunities
- Ensuring continuity of the people’s livelihood
- Empowering services for the people
- Building self-identity, developing human values
The 2026 budget is also the first Madani budget to not introduce new taxes, as the government aims to create a fairer and wider tax base with selective measures promoting sustainability, digitalisation, and competitiveness.
“If you have any questions about the new tax rules in the 2026 Malaysian budget, please feel free to contact us.”
Ang Heng Ann, Tax Partner, ECOVIS Malaysia PLT, Kuala Lumpur, Malaysia
Key tax measures of the 2026 Malaysian budget
For businesses
- LLPs: 2% tax on annual profit distributions exceeding MYR 100,000.
- Automation & AI: Accelerated capital allowances for heavy machinery acquired from local manufacturers, information and communications technology and AI-related expenditure.
- FSI exemption: Extended for four years (2027–2030) for foreign-sourced dividends and capital gains received by Malaysian resident companies, LLPs, cooperative societies and trust bodies.
- Tourism incentives: Tax exemptions for inbound tour operators, organisers of international incentive trips, conferences and trade exhibitions, and tax deduction on costs of renovation and refurbishment for tourism projects in line with Visit Malaysia 2026
- Agriculture & food security: 100% income tax exemption up to 10 years for food production projects and automation in agriculture projects.
- Social care: Enhanced tax deductions for companies providing scholarships, training for people with disabilities or employment of seniors.
Individual tax relief
- Extended deductions for childcare expenses up to MYR 3,000 (age limit increased to 12)
- Special children’s medical expenses increased to MYR 10,000
- Expansion of the scope for vaccination costs (MYR 1,000), home safety/CCTV expenses (up to MYR 2,500), and entrance fees to tourist attractions and cultural programmes (up to MYR 1,000)
Indirect taxes
- Incremental increases in excise duty on cigarettes (+MYR 0.40/pack) and alcohol (+10%) with the clear intention promoting a healthier lifestyle.
Overall, the 2026 budget is a prudent yet progressive roadmap, balancing fiscal responsibility with people-centric growth. It deepens Malaysia’s commitment to sustainability, innovation, and inclusivity, while preparing the nation for a resilient and future-ready economy.
