Executive Summary
This guide provides a comprehensive overview of the key tax incentives available to Small and Medium Enterprises (SMEs) in Malaysia for the years of assessment 2025 and 2026. Understanding and utilizing these incentives can significantly reduce your tax liability and free up capital for reinvestment and growth.
1. Preferential Tax Rates for SMEs
SMEs in Malaysia benefit from a preferential tax rate structure. The first RM150,000 of chargeable income is taxed at 15%, and income between RM150,001 and RM600,000 is taxed at 17%. Income exceeding RM600,000 is taxed at the standard corporate rate of 24%.
2. Pioneer Status (PS) and Investment Tax Allowance (ITA)
For businesses in promoted industries and activities, the government offers Pioneer Status (PS) and Investment Tax Allowance (ITA). PS provides a 70% to 100% income tax exemption for 5 to 10 years, while ITA allows for a deduction of up to 60% of qualifying capital expenditure from statutory income.
3. Digitalisation and Automation Incentives
To encourage digital transformation, the government has introduced several incentives, including a special deduction of up to RM50,000 for e-invoicing implementation and a 50% matching grant (capped at RM5,000) under the Digitalisation Grant Scheme.
4. Green Incentives
For businesses engaged in green technology, the Green Income Tax Exemption (GITE) and Green Investment Tax Allowance (GITA) are available. These incentives offer tax exemptions and allowances for qualifying green activities and investments.
5. Other Notable Incentives
- Accelerated Capital Allowance (ACA): For faster depreciation on ICT equipment and other qualifying assets.
- Double Deduction for R&D and Training: To encourage investment in innovation and skills development.
- Tax Rebate for New SMEs: A 20% tax rebate on the first RM20,000 of chargeable income for the first three years of assessment for new SMEs.
How to Apply
The application process for these incentives varies. Some are automatic, while others require application to the relevant government agencies, such as MIDA or MDEC. It is advisable to seek professional advice to ensure you meet the eligibility criteria and follow the correct application procedures.
Related Services
Our Tax Advisory & Compliance team can help you to identify the tax incentives that are most relevant to your business and assist you with the application process.
Last updated: 15 October 2025