For year of assessment (YA) 2026, a Sdn Bhd that qualifies for the SME rates pays 15% on its first RM150,000 of chargeable income. It pays 17% on the next RM450,000 and 24% on the balance. A company that does not qualify pays 24% on all of its chargeable income.
This guide is for owners of companies resident and incorporated in Malaysia, and covers the financial year ending in 2026.
In short
- YA 2026: 15% up to RM150,000, 17% from RM150,001 to RM600,000, 24% above that. Companies that don’t qualify pay 24% throughout.
- Budget 2027 proposes 14% and 16% for the first two bands from YA 2027. The cut applies only once it is passed into law.
- Check your paid-up capital and shareholders as they stood at the start of your basis period, usually the first day of your financial year.
What is the Sdn Bhd tax rate for YA 2026?
| Chargeable income | SME (YA 2026) | Not an SME (YA 2026) |
|---|---|---|
| First RM150,000 | 15% | 24% |
| RM150,001 to RM600,000 | 17% | 24% |
| Above RM600,000 | 24% | 24% |
Sources: Public Ruling 8/2025, paragraph 6.2.2 (Table 5) and paragraph 6.2.1; Budget 2027 tax measures, Appendix 11.
Important: Each rate applies only to the income inside its band, so crossing RM150,000 leaves your first RM150,000 at 15%.
What decides your Sdn Bhd’s tax rate?
Two things decide your Sdn Bhd’s tax rate: whether it qualifies as a small and medium company (SME), and its chargeable income. Chargeable income is your company’s profit after tax adjustments; the rates apply to that figure. The rates sit in Schedule 1 of the Income Tax Act 1967, and LHDN’s Public Ruling No. 8/2025 (22 December 2025) sets out who qualifies.
“2026” means YA 2026. For most companies, that is the financial year ending in 2026.
Example: which income falls into YA 2026 (Public Ruling 8/2025, Examples 2 and 13):
- A café with a 31 December year end: January to December 2026 income.
- A trading company with a 30 June year end: July 2025 to June 2026 income.
Does your company qualify for the SME rates?
In plain terms: a company resident and incorporated in Malaysia, with paid-up capital of RM2.5 million or less, gross business income of RM50 million or less, no more than 20% foreign ownership, and no ownership link of more than 50% with a company whose paid-up capital is above RM2.5 million.
Your company must meet every condition below for YA 2026 (Public Ruling 8/2025, paragraphs 5.3 and 6.2.1):
- Resident and incorporated in Malaysia.
- Paid-up ordinary share capital of RM2.5 million or less at the start of the basis period. For most companies, that is the first day of the financial year.
- Gross income from business of RM50 million or less in the basis period. Only your company’s own business income counts. Leave out related companies’ income.
- No more than 20% foreign ownership at the start of the basis period. This counts shares held directly or indirectly by companies incorporated outside Malaysia or by non-Malaysian citizens. The test has applied since YA 2024.
- No more-than-50% link to a company with over RM2.5 million capital. Counting direct and indirect holdings, your company fails if:
- a related company owns more than 50% of it
- it owns more than 50% of a related company
- another company owns more than 50% of both
A related company here is one with paid-up ordinary share capital above RM2.5 million at the start of the basis period. Ownership is traced up to the ultimate holding company. For example, a company 70% owned by a Bhd with RM10 million paid-up capital fails this test (Public Ruling 8/2025, Example 10).
Important: A holding company incorporated outside Malaysia counts as foreign, even when Malaysian citizens own it. So a Sdn Bhd wholly owned by a Singapore company held by two Malaysians is not an SME (Public Ruling 8/2025, Example 15).
How is Sdn Bhd tax calculated? A worked example
Apply each rate to its own slice of your company’s chargeable income.
Kafe Contoh Sdn Bhd is a fictional café company in Petaling Jaya. Its financial year ends on 31 December 2026, so this is YA 2026.
On 1 January 2026, two Malaysian citizens held its RM100,000 paid-up capital, and it had no parent company. Its gross business income for 2026 is RM2.1 million and its chargeable income is RM400,000. It meets all five conditions.
| Kafe Contoh Sdn Bhd, YA 2026 | RM |
|---|---|
| First RM150,000 at 15% | 22,500 |
| Next RM250,000 at 17% | 42,500 |
| Tax payable | 65,000 |
That is 16.25% of its chargeable income.
Now suppose a company incorporated in Singapore had held 30% of Kafe Contoh’s shares on 1 January 2026. Kafe Contoh would fail the 20% test and pay 24% on the whole RM400,000. That is RM96,000, or RM31,000 more.
Most companies pay this tax in instalments during the year. Your company files a CP204 estimate no later than 30 days before its basis period begins. It then pays that estimate in equal monthly instalments (Income Tax Act 1967, section 107C; Public Ruling 8/2025, paragraph 6.6.1).
A newly operating SME may be exempt at first (section 107C(4A)).
What does Budget 2027 propose for SME tax rates?
Budget 2027 was tabled on 9 October 2026. It proposes cutting the first two SME bands by one percentage point from YA 2027 (Budget speech, paragraph 127; tax measures, Appendix 11):
- First RM150,000: 15% to 14%
- RM150,001 to RM600,000: 17% to 16%
- Above RM600,000: unchanged at 24%
The cut applies only once it is passed into law. YA 2026 rates are unchanged, and Appendix 11 proposes no change to who qualifies.
The timing depends on your year end. If the cut passes and your year end is 30 June 2027, a qualifying SME’s income from July 2026 to June 2027 would be taxed at 14% and 16%.
On the same RM400,000, Kafe Contoh would pay RM61,000 for YA 2027, which is RM4,000 less. The most a qualifying SME could save under the proposal is RM6,000, once chargeable income reaches RM600,000. For the other Budget 2027 proposals, see our Budget 2027 guide.
How Altomate handles this
SimpliFY brings your bookkeeping, company tax return (Form C) and employer return (Form E) into one plan.
Frequently asked questions
What was the Sdn Bhd tax rate for YA 2025?
The same as YA 2026: 15%, 17% and 24% for a qualifying SME, and 24% for other companies. Public Ruling 8/2025 shows these SME bands applying from YA 2023.
Do LLPs pay the same tax rate as a Sdn Bhd?
Yes, if the LLP qualifies. A resident LLP registered in Malaysia, with a capital contribution of RM2.5 million or less and meeting the other conditions, gets the same bands. Otherwise it pays 24% (Public Ruling 8/2025, paragraph 6.2.1).
Can a foreign-owned Sdn Bhd get the SME rate?
Only if companies incorporated outside Malaysia and non-citizens together own 20% or less of its paid-up ordinary share capital, directly or indirectly, at the start of the basis period. Above that, it pays 24% on all its chargeable income. The rule has applied since YA 2024.
When would the proposed 14% SME rate start?
Budget 2027 proposes it from YA 2027, the financial year ending in 2027, alongside 16% for the second band. It applies only once it is passed into law. YA 2026 stays at 15% and 17%.
Sources (read 13 October, re-checked 19 October 2026)
- LHDN, Public Ruling No. 8/2025, Tax Treatment for Micro, Small and Medium Companies (22 December 2025): https://www.hasil.gov.my/wp-content/uploads/pr-8-2025-tax-treatment-for-micro-small-and-medium-companies.pdf
- LHDN, Tax Rate of Company (updated 25 June 2026; lists rates for YA 2023 to 2024 only): https://www.hasil.gov.my/en/syarikat/kadar-cukai-syarikat/
- MOF, Budget 2027 Tax Measures, Appendix 11, including the “Current Position” (9 October 2026): https://belanjawan.mof.gov.my/pdf/belanjawan2027/ucapan/tax-measures.pdf
- MOF, Budget 2027 speech, paragraph 127: https://belanjawan.mof.gov.my/pdf/belanjawan2027/ucapan/bs27.pdf
- Income Tax Act 1967: Schedule 1 and section 107C.
Confirm the current requirement with LHDN or a licensed tax agent.
