The Malaysia Budget 2026, the fourth under the Ekonomi MADANI framework and the first under the 13th Malaysia Plan (13MP), marks a strategic shift from economic stabilisation to transformation.
With a total allocation of RM419.2 billion, the budget focuses on revitalising the economy, accelerating structural reforms, and strengthening social protection. It aims to balance expansionary spending with fiscal prudence. This budget is designed to be a catalyst for sustainable growth, attracting quality investments, and improving the lives of all Malaysians.
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ESG and Sustainability Measures
The Budget 2026 solidifies Malaysia’s commitment to its decarbonisation ambitions and green economy. A significant measure is the introduction of a carbon tax in 2026, which will initially target the iron, steel, and energy sectors. This mechanism will be aligned with the National Climate Change Bill and the National Carbon Market Policy. The carbon tax is expected to start at a low rate to avoid inflationary impacts.
Complementing this are various green technology incentives:
- Green Investment Tax Allowance (GITA): A 100% GITA will be given to companies using green technology products certified by MyHIJAU Mark, with the budget speech suggesting these products must be sourced locally.
- Green Technology Financing Scheme (GTFS 5.0): An allocation of RM1 billion has been made for this scheme, which is extended until December 31, 2026.
- Individual Tax Relief: The RM2,500 tax relief for the purchase of EV charging facilities and food composting machines is expanded to include household food waste grinders and CCTV for home use. This relief can be claimed once in either the 2026 or 2027 Year of Assessment (YA).
Digitalisation and Automation
The government is leveraging digitalisation to strengthen tax compliance and boost business efficiency. The nationwide rollout of e-Invoicing by mid-2026 will provide the Inland Revenue Board with real-time tools to reduce tax evasion. This initiative is supported by the introduction of a digital tax stamp mechanism and stamp duty self-assessment in 2026 to combat counterfeiting and revenue leakages.
To further stimulate a technology-driven economy, the budget includes:
- Accelerated Capital Allowances (ACA): A 20% initial allowance and a 40% annual allowance are offered for qualifying capital expenditure incurred from October 11, 2025, to December 31, 2026, for the purchase of ICT equipment, computer software, and consultation fees related to customized software development.
- AI Incentives: A 50% additional tax deduction is available for expenses incurred by Micro, Small, and Medium Enterprises (MSMEs) on AI training recognized by the MyMahir National AI Council for Industry (NAICI).
Cultural, Arts, and Tourism
In support of the Visit Malaysia Year 2026 campaign, the government has unveiled a suite of tax incentives to boost the tourism sector.
- Renovation and Refurbishment Deduction: Tourism operators registered with the Ministry of Tourism, Arts and Culture (MOTAC) can claim tax deductions of up to RM500,000 for renovation and refurbishment expenses of business premises.
- Tax Exemptions: Organisers of international events can receive a 100% income tax exemption on statutory income for qualifying events, while tour operators who attract a minimum of 1,000 foreign tourists annually will benefit from a 100% tax exemption on incremental income from inbound tourism packages.
- Individual Tax Relief: A new tax relief of up to RM1,000 will be introduced for the 2026 YA for entrance fees to tourist attractions and cultural/art programs.
Social Protection and Enterprise Support
The Budget 2026 continues to focus on strengthening social protection and supporting vulnerable groups.
- Childcare Relief: The annual tax relief of RM3,000 for childcare fees is now expanded to include registered daily care and after-school transit facilities for children up to 12 years of age.
- Support for Gig Workers: The enhanced i-Saraan Plus scheme offers gig, e-hailing, and p-hailing workers matching EPF contributions of up to RM600 per year or RM6,000 over a lifetime. The government will also subsidize 70% of SOCSO contributions for gig workers in the first year and 50% in the second year.
- Tax Deductions for Donations: The scope of approved donations eligible for income tax deduction is expanded to include cash donations to Civil Society Organisations (CSOs) for approved anti-corruption education programs and to endowment funds established by public university teaching hospitals. Additionally, tax deductions will be available for companies and individuals contributing to the Kampung Angkat and Sekolah Angkat MADANI programs.
- Support for Social Enterprises: The application period for the income tax exemption for accredited social enterprises is extended to December 31, 2028.
Bernard Business Consulting’s Perspective on Budget 2026
In contrast to previous Budget 2024 and Budget 2025, which introduced major new tax measures, Budget 2026 focuses on the implementation and strengthening of existing policies.
The budget’s theme aligns with the broader ASEAN focus on inclusivity and sustainability. Measures that enhance social protection, such as the expanded childcare relief and support for gig workers, demonstrate a commitment to lifting the standard of living for all Malaysians. In conjunction with Visit Malaysia Year 2026, the budget provides targeted incentives for the tourism sector, including tax deductions for renovation and refurbishment expenses and tax exemptions for event organisers and tour operators. This focus on tourism also presents an opportunity for the growth of sustainable tourism, ensuring a balance between economic development, environmental preservation, and social well-being for local communities.
This budget also takes a firm stance on strengthening governance. The allocation of funds to enforcement agencies and the emphasis on anti-corruption education through tax deductions for donations to Civil Society Organisations (CSOs) are crucial steps. While changing mindsets takes time, these measures signal a strong commitment to fostering a culture of accountability and transparency. The success of these initiatives is essential for a clean and green future, building trust and ensuring that economic growth benefits everyone equitably.
In conclusion, while Budget 2026 might not be filled with a host of new tax measures, its emphasis on reinforcing the existing framework is a commendable and necessary move. The full implementation of policies like the Outcome-Based Incentive Framework and the continued support for digitalisation and automation through measures like Accelerated Capital Allowances provide businesses with a clear roadmap to navigate a more transparent, tech-enabled compliance landscape. By focusing on these existing mechanisms and promoting a culture of accountability, the budget provides a solid foundation for businesses to accelerate their sustainability journey and contribute to a more competitive and inclusive Malaysia.
To understand how to leverage these existing tax measures to supercharge and future-proof your business through sustainability initiatives, talk to our consultants today. Contact us to learn how to align your business strategies with the new fiscal landscape and capitalise on the opportunities presented by Malaysia’s Budget 2026.
Sources
- SPEECH FOURTH MADANI BUDGET 2026 by: YAB DATO’ SERI ANWAR BIN IBRAHIM, PRIME MINISTER AND MINISTER OF FINANCE
- Budget Touchpoints 2026
- Tax Measures
- Economic Outlook 2026
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