Malaysia: Budget 2027 – Key Payroll Measures – YA 2027

In the Budget 2027 Speech (Ucapan Belanjawan MADANI Kelima Tahun 2027), tabled in the Dewan Rakyat on 9 October 2026 by the Prime Minister and Minister of Finance, the Government announced a set of payroll-related measures. These affect resident individual income tax (rates and reliefs), the Employees Provident Fund (EPF / KWSP) and social security (PERKESO). Tax measures take effect from the year of assessment (YA) 2027; the minimum-wage increase takes effect from June 2027; other measures take effect from stated dates in 2027.

The measures are Government proposals announced in the Budget. They take legal effect only on enactment of the relevant instruments.

This alert covers private-sector payroll measures.

Summary of the proposed measures

Personal income tax — resident rates (feeds Monthly Tax Deduction / Potongan Cukai Bulanan, PCB)

The two one-percentage-point band cuts and the higher self relief (RM12,000) reduce monthly PCB for affected employees from January 2027; the new 30% threshold at RM1,000,000 increases PCB for high earners. Payroll engines and TP1 handling must be updated once LHDN publishes the YA 2027 PCB computation and schedule.

Personal income tax — reliefs (feed PCB and the TP1 employee relief declaration; effective YA 2027)

EPF (KWSP) and social security (PERKESO)

Automatic EPF membership at age 18 changes new-starter EPF-number provisioning and onboarding.

References

Budget 2027 Speech (Ucapan Belanjawan MADANI Kelima Tahun 2027), Ministry of Finance, delivered 9 October 2026 — https://mof.gov.my/portal/ms/berita/ucapan/ucapan-belanjawan-madani-kelima-tahun-2027

Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.

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Budget 2027: Key Payroll Measures

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