With the 2026 Budget announced by the Prime Minister Datuk Seri Anwar Ibrahim on 10 October 2025, Malaysia is poised to open a new chapter under MADANI economic framework. Budget 2026 signals a strategic pivot toward seeking a strengthened fiscal position—maintaining high-value investments, accelerating digital and green transformation with long-term reform imperatives—balanced with a continued emphasis to improving social protection. There is also a continued emphasis on enforcement, rather than new taxes, to support Malaysiaʼs journey toward a more competitive and inclusive economy.
Key takeaways from global mobility perspectives:
For organisations managing expatriate populations or cross-borders business travellers, this evolution points to a period of regulatory tightening and process modernisations—with less emphasis on new headline taxes, but a greater scrutiny on employment compliance, cross-border mobility and digital tax administration.
Personal tax reliefs
Reintroduction
Entrance fees for local tourist attractions and cultural programmes (limited to MYR1,000)
(Effective for Y/A 2026)
Expansion
Life insurance premium payments or family takaful contributions for self/spouse (limited to MYR3,000)
The scope is to be expanded to include children.
The eligibility criteria for insured children for the purpose of claiming individual income tax relief on life insurance premiums/takaful contribution, education and medical insurance premiums be determined as follows:
(Effective from Y/A 2026)
Environmental sustainability and home safety-related expenses (limited to MYR2,500)
The scope is to be expanded to include the following categories and claim limited to once within a period of 2 years of assessment:
(Effective Ys/A 2026 and 2027)
Expansion & increase
Medical treatment expenses for self, spouse or child (limited to MYR10,000)
The scope of category (III) is to be expanded to include all types of vaccination registered and approved by the Ministry of Health
The limit for category (VI) is to be increased from MYR6,000 to MYR10,000.
(Effective from Y/A 2026)
Expansion & extension
Child care fees to a registered child care centre/kindergarten for a child aged 6 years and below (limited to MYR3,000)
The current time-bound tax relief of MYR1,000 be made permanent and combined with the existing permanent relief of MYR2,000, resulting in a total claimable tax relief at MYR3,000, and the scope is to be expanded to include day care centres or after-school transit centres registered with the Department of Social Welfare and to be extended for children up to 12 years old.
(Effective from Y/A 2026)
With the changes in tax relief that can be claimed by individual employees, employers will need to ensure that their payroll system is configured and updated with the latest reliefs amount to ensure accuracy in the monthly tax deduction (MTD) calculation given that Malaysia adopts a monthly tax deduction as final tax regime.
Additionally, the employer has to allow the employee to submit Form TP1 twice a year to the employer for purposes of adjusting the MTD deducted and remitted to the IRB.
Separately, the expansion of relief that can be claimed increases the administrative burden on taxpayers in maintaining proper documentary evidence to support the reliefs claimed in the tax return given that receipts are required to be produced during routine tax audits.
Allowable deductions—donations
(Effective date not specified)
Contributions for integrity and anti-corruption programmes/activities
It is proposed that the anti-corruption education programmes organized by Civil Society Organizations (CSO) be approved as national interest projects under Section 44(11C) Income, subject to certain programmes/activities.
Cash donations made to the approved anti-corruption education programmes organised by CSOs will be eligible for income tax deduction equivalent to the amount contributed, up to 10% of aggregate income.
(Effective for applications received by the Ministry of Finance from 1 January 2026 to 31 December 2028)
Contributions made to Kampung Angkat MADANI, Sekolah Angkat MADANI and Sejahtera MADANI programmes
Contributions made by individuals with business income to Kampung Angkat MADANI, Sekolah Angkat MADANI and Sejahtera MADANI programs to be eligible for income tax deduction. The quantum/limit of the tax deduction is not specified.
(Effective date is not specified)
Contributions to public university teaching hospitals endowment funds
Contributions to public university teaching hospitals endowment funds
Public university teaching hospitals to be allowed to establish endowment funds in which the cash contributions to the endowment funds be given tax deduction under Section 44(11D) ITA 1967, provided that the endowment funds are governed and managed solely by public university teaching hospitals, in line with the prescribed guidelines.
(Effective from Y/A 2026)
Expansion of tax deductions and new categories of tax deductions will incentivise public donations which can serve as a catalyst to enhance the effectiveness and sustainability of community led initiatives.
Informal or self-employed workers
Individuals continue with the existing i-Saraan scheme i.e matching incentives of:
Gig workers
Individuals will receive under the i-Saraan Plus scheme, matching contribution incentives of:
Under the Self-Employment Social Security Scheme, the government will subsidise the following percentages of contributions for first-time registrants in non-mandatory sectors:
Gig workers may stay longer with platforms that offer better social protection, improving retention and reducing turnover in the informal labour market.
These initiatives also encourage self-employed and gig workers to save for retirement and protect themselves through EPF and PERKESO, rather than relying solely on conventional bank savings.
The government subsidy (70%/50%) lowers entry barriers for first-time contributors.
Stamp duty exemption for employment contracts below MYR3,000 (Effective from 1 January 2026)
Monthly wage threshold for stamp duty exemption on employment contracts to be increased from MYR300 to MYR3,000 per month.
This will make it easier and more cost-effective for multinational and foreign firms to attract talents earning below MYR3,000.
Investor Pass
MIDA will adopt a more proactive approach in offering the Investor Pass to multinational companies and potential investors in key sectors, rather than relying on the foreign investors to apply for the pass on their own accord.
Residence Pass—Talent Fast Track programme
The Residence Pass-Talent Fast Track programme will continue to be offered to ensure that highly-skilled expatriates brought in by strategic investors are managed in a timely and efficient manner. The requirement of having a Malaysian Employment Pass for at least 3 years will be waived under the fast track programme.
As MIDA aims to accelerate investment initiatives in Malaysia, foreign investors, especially those in key sectors, can expect to be approached by MIDA directly for the necessary support in establishing and growing their businesses in Malaysia. This includes business activity eligibility assessment, support in obtaining the Investor Pass for visits to Malaysia and liaison with government agencies for a smooth and efficient investment facilitation process.
Highly skilled expatriates identified by the Government of Malaysia will continue to enjoy the privilege of obtaining a Residence Pass-Talent in a speedy manner through a simplified process under the fast track programme for long-term stays in Malaysia. Furthermore, accompanying dependents can enjoy the privileges under this programme such as spouses being able to work in Malaysia without needing to obtain a separate work authorisation and children of school going ages are not required to obtain a Permission to Study stamp, amongst other things. This reflects the Malaysian governmentʼs commitment to attracting and retaining top talents in the country.
While we await the draft Finance Bill 2025 for any further amendments the Budget may bring, we would like to invite you to join us for our upcoming Mobility Roundup webinar. During this session, we will discuss recent developments and updates on employment tax that impact both employers and employees in Malaysia.
The date for the webinar is still being finalised, and we will share the confirmed details with you as soon as they are available.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Hilda Liow
Partner
Phing Phing Lim
Partner
Sasha Reddy
Partner
Lay Har Wee
Director
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