Budget 2026 Snapshot

Budget 2026 reaffirms the Government’s steadfast commitment to reinforcing Malaysia’s economic foundations while promoting sustainable and inclusive growth. With a total allocation of RM419 billion, comprising RM338 billion for operating expenditure and the remaining RM81 billion for development expenditure, the Budget focuses on enhancing productivity and strengthening national competitiveness. These initiatives, aligned with the Government’s reform agenda of “Raising the Ceiling, Raising the Floor and Strengthening Good Governance”, demonstrate a forward-looking approach towards achieving sustainable prosperity, equitable development and a resilient future for all Malaysians. 

Overall, Budget 2026 underscores the government’s continued commitment to balancing fiscal consolidation with people-centric priorities, while strengthening economic resilience amid global uncertainties. The effectiveness of the tax reform measures introduced in recent years will become clearer in 2026, as implementation and compliance efforts progress. This period will also provide an opportunity to further refine policies and ensure Malaysia’s path toward sustainable and inclusive growth.

The extension of exemption on foreign source dividends and gains from the disposal of capital assets abroad for resident companies and limited liability partnerships to 31 December 2030 is welcomed and timely. This is important as taxpayers have been waiting for this good news for a while now. This will encourage investment overseas as well as remittance of fund back to our country. Malaysia, at least for now, could maintain its competitiveness as an outbound holding company jurisdiction, bearing in mind that the foreign source income exemption is a permanent feature in countries like Hong Kong and Singapore.

We view Budget 2026 as a strong affirmation of Malaysia’s commitment to advancing high-value and technology-driven industries. Together with other key allocations, the full implementation of the Outcome-Based Incentive Framework in 2026 is expected to further strengthen Malaysia’s high-value economic ecosystem – particularly in semiconductors, AI, digitalisation, pharmaceuticals and sustainability-focused sectors –  and significantly enhance Malaysia’s global competitiveness to better position the nation as a leading player in the high-value economy.

Having broadened the Sales Tax and Service Tax base quite significantly effective July 2025, the Government has shifted focus this Budget to pro-health tax aspirations, in line with the 13th Malaysian Plan proposal, and reiterated its journey plans for implementing carbon tax in 2026.

This Fourth Madani Budget is designed not just for immediate relief, but for long-term sustainability, forging economic resilience against future global shocks. The true measure of this effort will only be seen if we are successful in raising the rakyat’s standard of living, signalling a profound societal rejuvenation. Ultimately, this People’s Budget affirms that a strong nation is one where the benefits of reform are shared equitably, empowering every rakyat to thrive.