Strengthening support for the Rakyat while catalyzing change
PETALING JAYA, Oct 10 (Bernama) -- Malaysia's National 2026 Budget proposal reflects a Malaysia-focused agenda with a total allocation of RM470 billion¹, signals a strong push for people-centric reforms, easing the
rakyat’s burden while accelerating the nation’s digital and green growth.
According to
Mr. Soh Lian Seng, Head of Tax at KPMG in Malaysia, the proposals are clearly anchored in the Malaysia Madani policy framework, reflecting the government’s continued focus on strengthening Malaysia’s fiscal and economic position, while ensuring equitable improvements on the
rakyat’s quality of life.
“Budget 2026 builds upon Malaysia’s reform momentum with an emphasis on inclusivity, sustainability, and fiscal resilience,” said Mr. Soh. “While the direction is clear, its success will depend on how effectively these proposed measures are implemented to create tangible impact for businesses and the
rakyat.”
Among the key measures announced, Malaysia is set to introduce a carbon tax in 2026, targeting high-emission industries such as iron, steel, and energy. This marks a pivotal step toward advancing Malaysia’s green transition and reinforces the Government’s milestones to achieve net-zero ambitions by 2050. These initiatives align with global climate goals and would enhance Malaysia’s competitiveness in international trade.
The “Healthier Malaysia” theme makes a return this year in the fourth Madani budget, with higher excise duty rates on tobacco and alcoholic beverages effective 1 November 2025, alongside increased fundings into the national healthcare system. The budget also broadens individual tax relief to include all vaccines approved by the Ministry of Health, reinforcing the Government’s focus on preventive healthcare.
The push for digitalization, particularly in artificial intelligence (AI), and green energy continues to intensify as the Budget 2026 allocates RM1 billion to green financing, offers new tax deductions for AI and cybersecurity training for MSMEs, and extends the 100% Green Investment Tax Allowance (GITA) for companies using green technology. As the nation moves forward, responsible development will be crucial to ensure inclusivity, data security, and long-standing digital trust.
“Protecting the Rakyat” emerges as a clear national agenda in Budget 2026. Targeted cash aid schemes, including STR and SARA, are set to expand. Coverage under PERKESO will increase to include gig workers, elderly care systems will undergo much-needed reform, and travel incentives for Malaysians will be introduced to support domestic economic activity.
The budget extends the full stamp duty exemption for first-time homebuyers on properties priced up to RM 500,000, while raising the stamp duty rate from 4% to 8% for non-citizen individuals and foreign companies purchasing residential properties. This also signals the government’s intent to manage foreign ownership while supporting housing access for Malaysians and broader national objectives.
As the rakyat’s welfare remains a central focus, with the extension of personal income tax reliefs, broader coverage for differently-abled individuals (OKUs) and senior citizens, an increase in minimum wages, higher cash handouts, and a 10-year extension of the tax exemption on foreign-sourced dividend income received by individuals in Malaysia. These measures reflect the government’s intent to raise the floor, narrow income disparities, and ease the impact of rising living costs.
Budget 2026 also continues the trend of targeted tax incentives, including a 100% income tax exemption for new food production projects for up to 10 years and expanded automation tax incentives for closed-house livestock systems. These initiatives aim to drive agritech innovation, strengthen food security, and reduce Malaysia’s dependency on food imports.
As part of longstanding efforts to align strategic investments with national goals, the Outcome-Based Incentive Framework will be fully implemented for the manufacturing sector in the first quarter of 2026, followed by the services sector in the second quarter, marking a shift from quantity to quality in investment outcomes.
“Beyond being a financial plan, Budget 2026 will serve as a strategic blueprint to drive long-term inclusive growth,” added Soh. “It demonstrates a careful balance between immediate relief and long-term strategic reform, bridging rural-urban disparities and championing inclusive employment, so that the benefits of Budget 2026 are felt first and foremost by the
rakyat.”
For more insights, visit
kpmg.com.my/nationalbudget ¹ RM419.2 billion represents federal operating and developing expenditures whilst RM50.8 billion represents collective investments by Government-Linked Investment Companies, Federal Statutory Bodies and Minister of Finance Incorporated (MKD) companies and public-private investments.