07/01/2026

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SCAN ME

WEDNESDAY | JAN 7, 2026

RM1.5m tax exemption threshold for MSMEs hailed

BNM announces additional RM2.5b for SMEs PETALING JAYA: Bank Negara Malaysia (BNM) is providing an additional RM2.5 billion under its fund for small and medium enterprises, with a focus on channelling these funds to first-time borrowers. In a statement yesterday, the central bank welcomed the announcement by Prime Minister Datuk Seri Anwar Ibrahim in his 2026 New Year’s Message on the additional allocation for the fund and the introduction of a credit guarantee scheme. “To date, BNM has made available RM32.4 billion in concessional financing to support access to financing for SMEs through participating financial insti tutions, particularly viable micro and small enterprises that face financing constraints. “The upsize increases the total allocation under the fund to RM34.9 billion,“ it said. Moving forward, BNM said, it will transition to guarantee-based support, targeting RM10 billion in guaranteed financing. It said the transition to credit guarantee schemes will benefit a wider segment of SMEs, including first-time borrowers and new entrepreneurial activities. “The scheme will be implemented in collaboration with Credit Guarantee Corporation Malaysia Bhd and financial institutions,“ it said. FMM: Exempt SMEs from SST on input services KUALA LUMPUR: The Federation of Malaysian Manufacturing (FMM) recom mends exempting SME manufacturers of taxable goods from paying Sales and Service Tax (SST) on input services such as rentals and logistics, to prevent com pounding tax-on-tax effects that drive up costs. Its president, Jacob Lee, said, that relief from service tax and targeted sales tax exemptions would provide much needed headroom for SMEs to manage cash flow, reinvest in productivity improvements, and support business continuity. “FMM welcomes the waiver of service tax on rental services for SMEs with annual turnover up to RM1.5 million, alongside the reduction of the service tax rate to 6%. “The upward revision of the service tax threshold on rental services will help ease cost pressures for SMEs, especially manufacturers and supporting service providers that operate from rented premises due to limited financial capacity to purchase or build their own facilities,” he said in a statement yesterday. For many smaller businesses, rental expenses represent a fixed and unavoidable cost, and relief from additional tax burdens provides much-needed headroom to manage cash flow, invest in productivity improvements, and support business continuity, Lee added.

PETALING JAYA: Prime Minister Datuk Seri Anwar Ibrahim’s announcement that micro, small and medium enterprises in Malaysia will be exempted from income tax for sales up to RM1.5 million has been described as “very important news and one of the most positive policies for MSMEs for many years.” In stating this to SunBiz , Williams Business Consultancy Sdn Bhd founder and director Prof Geoffrey Williams said, “I had recommended it last month as one of the key reforms for incoming minister Steven Sim so this is a great initiative for his portfolio”. The move is aimed at easing cost pressures on smaller firms and providing cash flow to support operations, wages and growth initiatives. Commenting on the RM1.5 million threshold, Williams said: “The RM1.5 million threshold is very meaningful and will help almost all micro-enterprises and small businesses. It will have very little impact on revenue because companies in this category pay very little tax anyway. However, it will provide much-needed cash flows which will help with wages and financial costs and it will provide more scope for investment. The exemption will allow MSMEs to redirect funds towards key business priorities. “It will free Ű BY DEEPALAKSHMI MANICKAM sunbiz@thesundaily.com

o PM’s announcement very important news and one of the most positive policies for such enterprises for many years, says economist

He said that while the exemption provides immediate relief, additional support is needed to sustain growth and encourage innovation, particularly among young entrepreneurs. “Give more funds to young entrepreneurs involved with MSMEs. Basically, the government has already introduced a few items but I think now the government needs to target youngsters with digital-based MSMEs and SMEs and help them to be more productive.” Not only grants, Nanthakumar said, but training based on current digitalised business matters. “More trainings and fast fund for youth and youngsters mainly for young entrepreneurs. We can see few of them shine, but Malaysia need more. From low end business towards international marketing MSMEs.” Nanthakumar pointed out that young entrepreneurs and digital-based MSMEs could particularly benefit from complementary measures. Both economists emphasised that the RM1.5 million tax exemption, while targeted, is part of a broader push to strengthen Malaysia’s MSME sector and enhance productivity, job creation and competitiveness in the regional market. Mohd Sedek also highlighted that Malaysia has built an impressive network of trade agreements and digital trade platforms, but for many MSMEs, the fixed costs of operating formally, including documentation, certification, tax and regulatory compliance, remain a hurdle to growth or export expansion. “By easing the tax burden at the lower end of the enterprise ladder, the government makes it more viable for firms to scale up, enter new markets and move into higher value-added activities,” he said. Mohd Sedek said that the government’s measures are eco nomically disciplined rather than generous, as they support domestic demand, stabilise employment and improve the odds that Malaysia’s trade access translates into real business expansion as the economy moves into an early-cycle phase in 2026.

up money which can be redirected to higher wages, investment and innovation and it cuts tax admi nistration costs and tax avoidance,” he noted. Universiti Teknologi Malaysia Professor Dr Nanthakumar Loga nathan said the exemption would boost MSME productivity and profits in the short term. “SME/MSMEs is the biggest economic activity contributors in Malaysia. With tax exemption, there Williams: It will free up money and ease cash flows.

will be more happy creating more outcomes and create more job opportunity for the Malaysian.” Nanthakumar highlighted Malaysia’s strong MSME presence in the region. “You can refer to the statistics from Department of Statistics Malaysia on the value of GDP contributed by MSMEs and SMEs in Malaysia. Even in Asia, Malaysia is one of the countries having huge numbers of MSMEs and SMEs.” Nanthakumar: Boost for productivity and profits in the short term.

‘E-invoice extension, lower rental service tax provide relief’ KUALA LUMPUR: The Malay Chamber of Commerce Malaysia (MCCM) stated that the extension of the e-invoice deadline and the reduction of service tax on rentals for businesses would provide significant relief, especially for owner-managed businesses. pliance and retraining workers due to frequent staff turnover,” he told Bernama. comply by attending training sessions and adopting the Inland Revenue Board’s e-invoice appli cations, indicating growing accept ance of the system despite earlier reservations. “Seen in that light, the exemption is more about main taining cash flow and business confidence where it matters most than simply being a tax giveaway,” he said.

Norsyahrin was commenting on an announcement by Prime Minister Datuk Seri Anwar Ibrahim regarding the extension of the penalty-free transition period for e-invoice implementation by one year for companies with annual sales of between RM1 million and RM5 million. Anwar also announced that the service tax on rentals for MSMEs has been reduced to 6% from 8%, while businesses recording annual sales of up to RM1.5 million are exempt from service tax on rentals. Norsyahrin said these measures would strengthen efforts to curb the shadow economy, while easing compliance pressure on MSMEs. “Wider adoption of e-invoice enhances transparency in business transactions and reduces un reported economic activity, which is estimated to exceed RM300 billion, or about 20% of the country’s gross domestic product,” he said. Norsyahrin noted that many SMEs have already taken steps to

IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said the latest government measures address a key constraint to Malaysia’s economic recovery. “Demand is no longer the weak link. Households are spending again, but the cost (of goods and services) is high. “As we set out in our Economic Pulse 2026 publication, smaller firms are being caught between higher wages, tighter labour availability, rising logistics and compliance costs, and more expensive financing, just as they are being asked to digitalise and become more productive,” he told Bernama. Without some relief, Mohd Sedek emphasised that these pressures would show up in slower hiring, postponed investment and thinner margins, gradually draining mo mentum from the real economy.

MCCM president Norsyahrin Hamidon said the extended penalty-free period would give businesses, especially MSMEs, more time to adjust their processes and manage the additional admini strative demands arising from the adoption of e-invoice. “The implementation of e invoice increases administrative requirements, as invoices must be issued and submitted directly into the tax authority’s system in real time and can no longer be amended informally. “In many SMEs, the same individual handles sales, admi nistration and collections, so any additional compliance requirement naturally adds to the workload. This has led some SMEs to incur additional costs, including assigning additional staff to manage com