KUALA LUMPUR — How much will you be able to save in taxes in Malaysia, based on the proposed new income tax rates and individual tax relief in Budget 2027?

But first, very quickly, take a look at how the government proposes to change the income tax rate from 2027 onwards:

The main changes include reducing the tax rate for the chargeable income band of RM70,001 to RM100,000 from 19 per cent to 18 per cent, and reducing it for the RM100,001 to RM150,000 band from 25 per cent to 24 per cent.

To calculate how much tax you will be paying, take your total income in 2027, and then subtract the tax reliefs you will claim, which leaves you with the “chargeable income”.

Since Malaysia uses a progressive tax system, the tax you have to pay will be based on the different tax rates for the different income bands in your overall chargeable income, instead of one flat tax rate for your entire chargeable income. 

So based on the proposed new tax rates for 2027, you could save RM300 or RM800 in tax, if your chargeable income is for example RM100,000 or RM150,000. 

If your chargeable income is RM2 million, you will have to pay RM19,200 more in taxes, as the higher tax rate of 30 per cent is proposed to kick in earlier when the chargeable income exceeds RM1 million.

On Deloitte Malaysia’s website, its tax leader Sim Kwang Gek in her Budget 2027 commentary noted that the proposed 30 per cent tax rate (starting from above RM1 million instead of only to above RM2 million) appears aimed at partially offsetting the lesser revenue from middle-income taxpayers due to their lower tax rates, while ensuring higher-income taxpayers contribute more to the government’s overall tax revenue.

“The proposal therefore reinforces the progressive nature of Malaysia’s personal income tax system by shifting part of the tax burden towards those with a greater ability to pay,” she said.