by Agmo Studio
Budget 2027 was tabled in the Dewan Rakyat on 9 October 2026 under the theme “Menggapai di Langit, Mengakar di Bumi” (Reaching for the Sky, Rooted in the Earth). The Government names AI, semiconductors, new energy, the digital economy and high-value industries as the areas where Malaysia should leap. It projects GDP growth of 4.8–5.3% for 2026 and 4.2–5.2% for 2027.
Here is our summary of the measures that matter most to AI, software and tech businesses, with what the speech says about each one. Rates, eligibility and effective dates will be set by the Finance Bill and agency guidelines, so treat this as a map of what to look into, not tax advice.
Tax incentives and allowances
- ICT capital allowance extended to 2030. The Accelerated Capital Allowance for plant and machinery and for ICT equipment and software is extended to 31 December 2030.
- Lower SME income tax. The rate drops by one percentage point: 14% on the first RM150,000 of chargeable income and 16% on the next RM150,000 to RM600,000. The Government says this gives about 300,000 SMEs up to RM6,000 in extra income.
- Small-asset capital allowance raised. The value limit per eligible small asset rises to RM3,000, and the overall claim limit for companies other than SMEs rises to RM30,000.
- Tax exemption for startup investors. The income tax exemption for individuals investing through equity crowdfunding (ECF) platforms, and for catalyst investors funding early-stage tech startups, is extended to 31 December 2030.
- Deduction for training young talent. Companies that run the BAKAT MADANI training programme get a tax deduction from 29 June 2026 to 31 December 2030.
- Stamp duty on P2P financing. Loan agreements made through peer-to-peer financing platforms pay RM10 stamp duty from 1 January 2027 to 31 December 2030.
- AI subscriptions in individual tax relief. The lifestyle relief is widened to cover AI subscriptions. The speech does not state a cap.
AI programmes and funding
- MDEC fund for SME AI adoption. RM30 million to help 4,000 SMEs adopt AI and automate operations, and to train and certify 5,000 AI professionals.
- Sovereign AI Cloud. The Government is planning a Sovereign AI Cloud so that citizens' data and strategic national information stay under Malaysian control. The speech gives no amount or timeline yet.
- AI Malaysia Berhad. Nearly RM15 million to strengthen a safe and ethical AI ecosystem, toward a target of 200,000 AI-skilled workers.
- Research and commercialisation. RM6 billion across ministries for research, development and commercialisation, plus a RM50 million UniVC fund (Government and KWAP) to bring university research to market.
- Free AI access for young people. 100,000 more free AI subscriptions, now extended to new AI applications such as ChatGPT. The Platform Rakyat Digital also offers free courses with Coursera, covering more than 16,000 courses and professional certificates.
- Malay-language data for national AI. Ministries, agencies and education institutions will contribute validated, annotated digital Malay-language data to Dewan Bahasa dan Pustaka, so Malaysia can build its own AI technology.
- Scam detection. The National Scam Response Centre will build an AI app that lets people check phone numbers, bank accounts and suspicious links before transacting.
- Security and identity. Malaysia is recognised at Tier 1 for readiness to move to post-quantum cryptography. NACSA and MCMC will develop local data-protection technology that can withstand quantum computing, and MyDigital ID now has over 14 million registered users across 203 public and private services.
Startup, venture and growth capital
- Khazanah's Jelawang Capital and KWAP's Dana Perintis invest RM450 million in startups.
- The NIMP Fund, KWAP's Dana Pemacu and Khazanah's MTC Fund total RM2.1 billion to strengthen mid-sized companies in areas such as E&E, digital, aerospace and medical devices.
- RM270 million is set aside to draw private capital through ECF and P2P platforms for SMEs, mid-sized companies and social enterprises.
- RM41 million goes to Cradle Fund for the Startup Ecosystem Roadmap and for prototype and commercialisation grants. MTDC's SemiconStart provides follow-on equity to startups such as IC design and advanced packaging.
- Penang is positioned as a national technology-finance hub, with a RM100 million Strategic Investment Fund from Khazanah and InvestPenang for early-stage semiconductor and advanced-manufacturing companies.
- Government-linked investment companies will mobilise RM25 billion of domestic investment through GEAR-uP. This includes a RM1.25 billion New Economy Venture Fund for data centres and logistics assets in Elmina, Selangor, and RM1.2 billion from Khazanah and KWAP to scale local semiconductor companies into higher segments.
SME digitalisation and financing
- Total loan and financing guarantee facilities rise from RM50 billion to RM57 billion in 2027. SJPP and CGC offer guarantees of up to RM32 billion, extended to mid-sized companies in all sectors with a guarantee limit of up to RM50 million, plus RM1 billion for local M&A.
- The NADI platform gets RM142 million to help more young entrepreneurs sell online, and JOM Malaysia gets RM10 million to bring rural products and high-value services onto digital platforms.
- MATRADE receives RM60 million and BPMB RM1 billion in financing to help SMEs enter export markets.
- An E-Commerce Bill will be tabled at the next sitting, and the Government is reviewing legal and enforcement steps against unregulated foreign e-commerce companies.
- For the low-altitude economy such as drones, CAAM is investing RM50 million in a digital system to manage airspace, national test sites and safety standards.
- JENDELA connectivity (RM5 billion in total) continues, with 4G planned for all Orang Asli villages, internet coverage on 7,000 km of roads and 1,700 km of rail, and the MADANI subsea cable (SALAM).
Talent, mobility and regional hubs
- Skills funding. RM8 billion for cross-ministry TVET. HRD Corp's RM3 billion fund offers 3 million skills-training places, PTPK provides RM500 million to finance trainees, and CIDB trains 10,000 young people in robotics and digital technology. BAKAT MADANI targets 30,000 new job opportunities in 2027.
- Global Services Hub (GSH) incentives, from 1 January 2027. New GSH companies get a special 5% tax rate on qualifying GSH income. Existing GSH or Principal Hub companies get 5% on income above their base income. The incentive period can be extended in five-year blocks up to 30 years, and GSH treasury and fund-management activities are exempt from withholding tax on interest and from stamp duty on inter-company loan agreements.
- Easier hiring of international talent. Existing DE Rantau nomad pass holders who reach the two-year limit get two more years. From 1 January 2027, spouses of Employment Pass Category I holders on a Dependant Pass may work in Malaysia, subject to conditions. The new MyABE status for Malaysian companies expanding in ASEAN comes with a five-working-day target for processing the initial Employment Pass applications of listed MyABE companies.
- Reinvestment Allowance is under review to make it more targeted and competitive.
What to do with this
- If you are planning AI, cloud, software or automation spend, ask your tax adviser how the extended ICT capital allowance applies to it.
- If you are an SME, watch for the MDEC AI adoption fund's criteria and application window, and consider pairing it with existing grants. See our Government Software Grant page for the SAG MADANI, Cradle and other schemes we have helped clients secure.
- If you are a startup, look at the Cradle, UniVC, SemiconStart and ECF routes, and the investor tax exemption now running to 2030.
- If you are weighing AI projects, the planned Sovereign AI Cloud and the national data focus make data residency and governance worth planning for now. See our AI consulting and sovereign AI services.
We will update this page as the Finance Bill, MDEC and the other agencies publish the detailed criteria. If you want help scoping an AI or software project against these incentives, talk to us.
Source: Budget 2027 speech (Ucapan Belanjawan 2027), delivered in the Dewan Rakyat on 9 October 2026. This is a summary for general information, not tax or legal advice. Confirm rates, eligibility and effective dates against the Finance Bill and official guidelines before relying on them.