SME Tax Rates Malaysia 2026 — Complete Guide

Updated April 2026 · Malaysian Tax Guide

Understanding SME tax rates is critical for Malaysian business owners and accountants. The Malaysian government provides preferential tax rates for qualifying Small and Medium Enterprises (SMEs) under the Finance Act 2023.

SME Tax Tiers for YA 2024 Onwards

SME companies enjoy a tiered tax structure that significantly reduces the effective tax rate compared to the standard corporate rate of 24%.

Chargeable Income	Tax Rate	Tax Amount
First RM150,000	15%	RM22,500
Next RM450,000 (RM150,001 — RM600,000)	17%	RM76,500
Above RM600,000	24%	Varies

For example, a company with chargeable income of RM1,000,000 would pay: RM22,500 + RM76,500 + (RM400,000 × 24%) = RM195,000. The effective tax rate is 19.5%, compared to 24% for non-SME companies.

SME Eligibility Conditions

To qualify for SME tax rates, a company must meet ALL of the following conditions:

Paid-up capital ≤ RM2.5 million — The company's ordinary share capital must not exceed RM2.5 million at the beginning of the basis period.
Annual gross income ≤ RM50 million — Total business income for the basis period must not exceed RM50 million.
Not controlled by a related company with capital > RM2.5 million — The company must not be controlled directly or indirectly by another company with paid-up capital exceeding RM2.5 million.

Non-SME Corporate Tax Rate

Companies that do not qualify for SME status are taxed at a flat rate of 24% on all chargeable income. This includes companies with paid-up capital exceeding RM2.5 million, foreign-controlled companies, and companies with revenue above RM50 million.

Practical Example

Gemilang Bina Sdn Bhd has paid-up capital of RM1,000,000, annual revenue of RM3,850,000, and chargeable income of RM680,000. Since PUC ≤ RM2.5M and revenue ≤ RM50M, the company qualifies for SME rates:

Tier	Amount	Rate	Tax
First RM150,000	RM150,000	15%	RM22,500
Next RM450,000	RM450,000	17%	RM76,500
Balance	RM80,000	24%	RM19,200
Total	RM680,000		RM118,200

Effective tax rate: 17.4% — saving RM45,000 compared to flat 24% rate.

Key Changes Under Finance Act 2023

The Finance Act 2023 maintained the three-tier SME structure but adjusted the thresholds. The 15% rate on the first RM150,000 was introduced to provide additional relief for micro enterprises. Previously, the first RM600,000 was taxed at a flat 17%.

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Frequently Asked Questions

What are the SME tax rates in Malaysia for 2026?

SME companies pay 15% on first RM150k, 17% on next RM450k, and 24% on balance. Non-SME companies pay flat 24%.

How do I qualify for SME tax rates?

Paid-up capital must be RM2.5M or less, annual revenue RM50M or less, and not controlled by a company with capital exceeding RM2.5M.

What is the effective tax rate for SMEs?

Depends on chargeable income. For RM600k CI, effective rate is about 16.5%. For RM1M CI, about 19.5%.