Budget 2026: What It Means for Malaysian SMEs

Kuala Lumpur, 10 October 2025 – Budget 2026 was announced at a time when businesses are navigating one of the most challenging economic environments in recent years — with global uncertainty, rising costs, and shifting market conditions testing even the most resilient entrepreneurs.

After two years of major tax changes — from the introduction of e-Invoice, capital gains tax, and dividend tax, to the expanded SST in July 2025 — what many business owners wanted this year was no new taxes or surprises.

They can finally breathe a sigh of relief: no new tax measures and no major policy overhauls.

This year’s RM470 billion national budget, the largest in Malaysia’s history, focuses on stability and business support. While it introduces no dramatic reforms, it gives entrepreneurs room to breathe, refocus, and rebuild.

Here are the five key areas that directly impact Malaysian SMEs:

1. Cash Flow for SMEs — The Lifeblood of Business

SJPP Loan Guarantees to Ease Financing Pressure
The government has expanded the Syarikat Jaminan Pembiayaan Perniagaan (SJPP) guarantee ceiling to RM30 billion, including RM5 billion specifically for exporters.

This allows SMEs with limited collateral to access loans more easily, as the government will guarantee up to 70% of their financing — helping more entrepreneurs overcome cash flow bottlenecks.

Other financial support includes:

• RM2.5 billion in microloans via BSN and TEKUN,
• RM50 million in cooperative financing, and
• RM500 million in soft loans through EXIM Bank for export-related businesses.

Faster Tax Refunds Under the Public Finance and Fiscal Responsibility Act
The government also pledged to speed up tax refunds under the Public Finance and Fiscal Responsibility Act (FRA) — a move long overdue for business owners.

Delayed refunds have been one of the biggest sources of liquidity strain for SMEs. Faster processing means businesses can reinvest in staff, equipment, and operations without waiting months for their own money to be returned.

“SMEs are always in need of working capital and cash flow. When refunds come faster, businesses can breathe easier and plan better,” said Datin Yap Shin Siang, Group Chief Executive Officer of YYC.

2. Encouraging Export Growth

Budget 2026 continues to support Malaysia’s exporters and globally active SMEs.

• RM5 billion under SJPP will guarantee export-related financing.
• RM500 million via EXIM Bank will support companies affected by global trade disruptions.
• Khazanah, KWAP, and BPMB will invest over RM1 billion into Malaysia’s semiconductor and electronics industry, reinforcing the country’s position in global value chains.
• RM60 million through MATRADE will help SMEs expand into Africa, Latin America, and Central Asia.

“The message is clear — Malaysia wants more of our local innovation and products to reach international markets,” Datin Shin noted.

3. Tourism Revival — Building Momentum for Visit Malaysia Year 2026

Tourism and hospitality are major beneficiaries of Budget 2026. The government is investing over RM700 million to attract tourists and boost local travel ahead of Visit Malaysia Year 2026. In addition, the following tax incentives were announced:

• Up to RM500,000 tax deduction for renovation and refurbishment of tourism premises;
• 100% income tax exemption on additional earnings from inbound tourism packages; and
• 50–100% tax exemptions for organisers of international exhibitions, arts, and cultural events.

Personal tax relief for domestic tourism has been reintroduced — helping smaller tourism players, and event organisers sustain their businesses.

“Tourism has always been one of Malaysia’s strongest economic engines. It’s time to welcome more tourists and let tourism drive our economy forward again,” said Datin Shin.

4. AI and Digital Upskilling — Building a Future-Ready Workforce

Artificial intelligence and digitalisation took centre stage in Budget 2026.

Malaysia’s growing status as a regional tech hub was reinforced with two landmark investments:

• Microsoft’s USD 2.2 billion investment to establish the West Malaysia Cloud Region and train 800,000 Malaysians through its AI for Malaysia’s Future programme
• Google’s USD 2 billion investment to build a data centre and Google Cloud region in Selangor.

Locally, SMEs can now claim an additional 50% tax deduction for AI and cybersecurity training programmes recognised by NAICI, TalentCorp, or MyDigital — a major step toward building a more digital-savvy workforce.

Additionally, Development Financial Institutions (DFIs) will provide nearly RM1 billion in financing and grants to help SMEs automate operations and digitalise business processes — further strengthening Malaysia’s innovation ecosystem.

The government also allocated RM5.9 billion for R&D, design, and commercialisation activities, alongside RM53 million under the Digital Accelerator Grant to support innovation in emerging technologies.

“Upskilling in AI and cybersecurity is no longer optional — it’s how our businesses stay competitive,” said Datin Shin.

5. Tax and Compliance — No New Taxes, Just Smarter Systems

Perhaps the most welcome news for businesses this year is what didn’t change.

There will be no further expansion of the Sales and Service Tax (SST) — a relief for SMEs already adjusting to the broader SST scope introduced in mid-2025.

Instead, the government is moving forward with digital tax administration to make compliance easier and faster:

• The e-Invoice system will be fully implemented nationwide in 2026, with no delays.
• The system will simplify reporting, reduce errors, and support faster refunds under the FRA.
• The new Stamp Duty Self-Assessment System, starting in 2026, marks another step toward a self-declaration, trust-based tax environment.

“With no further delays in e-Invoice implementation, SMEs can’t afford to wait,” Shin said. “The earlier you adopt, the smoother your transition will be.”

Conclusion: A Year to Refocus and Rebuild

Over the last two years, Malaysia’s business community has weathered major shifts — dividend tax, capital gains tax, expanded SST, and new reporting obligations. These transitions have tested the adaptability of entrepreneurs and professionals across every sector.

Budget 2026 signals a welcome pause. No new taxes. No compliance shocks. Just stability.

With a clear fiscal direction and strong support for SMEs, the next 12 months offer businesses the opportunity to regain focus — to strengthen systems, build capabilities, and prepare for the uncertainties ahead in the global economy.

“The world may remain unpredictable, but this Budget gives Malaysian businesses a window to breathe, refocus, and rebuild stronger,” concluded Datin Shin.

For more information on YYC, please visit www.yycadvisors.com

About YYC

YYC is a leading homegrown professional services firm in Malaysia, offering a comprehensive range of services that include accounting, taxation, audit, business advisory, and corporate services to businesses. In 2024, YYC expanded their offerings to include HR and POS software, providing businesses with tools to improve efficiency and streamline their operations. Founded on a commitment to excellence and a passion for helping clients achieve their financial and business goals, YYC has grown significantly since its inception in 1974.

As an innovative firm, YYC leverages technology to support their clients’ success. YYC taxPOD, the subscription-based tax education platform, empowers businesses with easy access to tax knowledge and resources, helping them stay compliant and informed.

To date, YYC has grown its dynamic team to over 1,000 employees based in Kuala Lumpur, Selangor, Kedah, Penang, Johor, Singapore and Hong Kong, serving more than 20,000 clients across Malaysia, Singapore and other countries. YYC’s team of experts leverages extensive experience and industry knowledge to provide solutions that meet the unique needs of each client with a focus on innovation, quality, customer satisfaction and making a positive impact in the business community.

For media enquiries, please contact:

Jin Yee Loh
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jinyee.loh@yycadvisors.com
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