PwC’s statement: Budget 2026

Budget 2026 lands as a welcome breather for businesses and the rakyat. After several years of revenue‑raising proposals, the Government has pressed pause on expansionary tax measures and opted for a smarter, steadier course: consolidate what’s already in place, sharpen enforcement, and deliver certainty.

People-focused

I applaud the Government for pushing through the subsidy rationalisation for RON95 which they had committed to in Budget 2025, albeit cutting it close to the Budget 2026 announcement. Along with the other subsidy rationalisation measures undertaken by the Government, it is estimated to result in RM15.5 billion in annual savings to the Government, which can be redistributed to the targeted groups.

For the rakyat, Budget 2026 drives the agenda of shaping social outcomes through targeted policies. Personal tax reliefs are either extended, re-introduced, or widened to help cushion household costs and drive social agenda. These include life insurance/takaful relief expanded to include children, and vaccination relief broadened to all vaccines registered and approved by the Ministry of Health. 

Childcare and kindergarten fee relief is expanded to registered daycare or transit centres for children up to 12 years old, easing the burden on working families. 

Tax enforcement in the age of accountability

Building on the momentum from previous years, the emphasis on governance and anti-leakage is evident in Budget 2026, demonstrating the Government’s commitment in maintaining its agenda of strengthening tax enforcement. Leveraging on the building blocks in previous years such as the introduction of the Tax Identification Number, e-Invoicing pilot, and various consolidation of tax administration last year, the Government’s approach in Budget 2026 is more assertive and provides a clear message: voluntary compliance is encouraged, but enforcement is decisive. Such measures are commendable and necessary as Malaysia moves towards a more transparent and equitable tax system where a culture of accountability will be crucial in the roll out. 

While Budget 2026 sets a clear tone for strengthening tax governance and enforcement, the details surrounding how these reforms will be implemented remain largely up in the air. The success of these initiatives will depend heavily on the implementation process, particularly a well-defined roadmap, the readiness of enforcement bodies, the quality of taxpayers’ engagement, and the transparency of communication. 

Building high-growth high-value sectors

Budget 2026 deploys a focused set of tax levers to accelerate investment and capability building in Malaysia’s high‑growth, high‑value sectors. Central to this is the new Outcome‑Based Incentive Framework, moving to full implementation for manufacturing from Q1 2026 and services from Q2 2026. By tying tax incentives to outcomes such as creation of high‑value jobs and balanced regional development, it better aligns reliefs with the National Industrial Master Plan’s priority activities, including semiconductors, advanced manufacturing, AI, and digital services.

Financing the innovation pipeline is supported through enhanced venture capital incentives for ten years, featuring special tax rates and dividend tax exemptions. This will help crowd in capital for startups and scale‑ups in strategic verticals like E&E, AI, cloud, and the energy transition.

To build enterprise capabilities at scale, MSMEs can claim an additional 50 percent tax deduction on recognised AI and cybersecurity training under MyMahir National AI Council for Industry (MyMahir-NAICI)—directly supporting the skills base required for digitalisation and automation. 

Property related measures

Budget 2026 extends the stamp duty exemption on instruments of transfer for residential property and on loan instruments for first-time homebuyers purchasing properties valued up to RM500,000 for a further two years, until 31 December 2027. This continued relief supports Malaysians aspiring to own their first home. The measure to increase the stamp duty rate on instruments for transfer of residential property for non-citizens, non-permanent residents, and foreign companies from 4% to 8% is also consistent with the Government’s focus on the rakyat’s welfare by curbing speculative activity in the property market. 

One measure that did pique my interest is the proposal to grant special tax deduction equivalent to 10% of the cost of renovation and conversion of commercial properties into residential properties, capped at RM10 million. This measure looks intended to encourage adaptive reuse and may signal recognition of a relative supply imbalance between the commercial and residential sectors.  

Driving sustainability

Following from the initial announcement in Budget 2025, Budget 2026 confirms that carbon tax is slated for next year, initially covering iron, steel, and energy. Carbon pricing, if designed with clear scope definitions, predictable rates, transitional reliefs, and robust measurement and reporting, will shift capital towards lower‑emission technologies and operating models. Alignment with the National Carbon Market Policy and the forthcoming National Climate Change Bill will be critical to ensure coherence across compliance, voluntary markets and corporate decarbonisation strategies.

At the household level, the proposal to expand individual income tax relief of RM2,500 to include purchases of food waste grinders directly incentivises sustainable consumption and waste management. While modest in monetary value, targeted reliefs can nudge adoption and normalise greener behaviours across the masses.

As Malaysia moves into the next phase of its development under the 13th Malaysia Plan (13MP), I remain hopeful that Budget 2026 will catalyse sustainable growth, attract quality investments, and uplift the lives of all Malaysians. 

Steve Chia
PwC Malaysia Tax Leader