Budget 2027 for Factory Owners: RM2,000 Minimum Wage, Sales Tax Refund and ACA to 2030

Key Takeaways

• The minimum wage rises from RM1,700 to RM2,000 a month from June 2027, but MSMEs with annual sales below RM50 million are exempt. A RM2,500 floor for semi-skilled workers and graduates is planned under a new wage framework.
• From 1 January 2027, local traders and distributors that paid sales tax on machinery, spare parts and equipment supplied to manufacturers can claim a refund, closing a gap that made buying from local dealers more expensive.
• The accelerated capital allowance for locally made plant and machinery, ICT equipment and software is extended to 31 December 2030, and the small value asset limit rises from RM2,000 to RM3,000 per item.
• MSME corporate tax drops one point from YA 2027, to 14% on the first RM150,000 and 16% on the next band up to RM600,000. The reinvestment allowance is under review, with no date yet.
• RM100 million goes to retention ponds and river maintenance against Klang Valley flash floods. FMM and SME Malaysia say the budget still does too little about operating costs such as energy, rent and wages.

What was announced

Prime Minister and Finance Minister Anwar Ibrahim tabled Budget 2027 in the Dewan Rakyat on Friday, 9 October 2026 (full speech text, The Edge; Prime Minister's Office). Most headlines focused on household aid and personal income tax. For anyone who runs, rents or buys a factory in Malaysia, the items that matter are spread across wages, capital allowances, indirect tax and infrastructure. This article pulls them together, with dates and figures as the speech and the published tax summaries state them.

Wages: RM2,000 from June 2027, with an MSME exemption

The minimum wage goes from RM1,700 to RM2,000 a month from June 2027. The speech says this benefits more than four million workers. MSMEs with annual sales below RM50 million are exempted "to provide room for adjustment to business models".

The government also announced a reform of the workers' income framework, "beginning with a minimum wage of RM2,500 a month for semi-skilled workers and graduates". How "semi-skilled" will be defined, and from when, has not been published.

A second wage rule matters for larger companies. From year of assessment 2028, companies other than MSMEs can claim a tax deduction for salaries only if wages are paid through financial institutions or prescribed cashless payment instruments, according to Grant Thornton Malaysia's Budget 2027 tax summary. The speech ties this to curbing the employment of undocumented foreign workers. Other expenses stay deductible whatever the payment method.

Machinery and equipment: cheaper to buy, faster to write off

Three measures lower the cost of equipping a factory:

• Sales tax refund facility, from 1 January 2027. Today a manufacturer's sales tax exemption on machinery, spare parts and equipment works only when it imports directly or buys from a registered local manufacturer. Buying from a local trader or distributor meant paying sales tax. Under the new facility, traders and distributors that paid sales tax on these goods supplied to manufacturers can claim a refund. It also covers inputs for pharmaceuticals, animal feed, fertilisers and pesticides.
• Accelerated capital allowance extended by four years. The 20% initial and 40% annual allowance for heavy machinery and plant bought from local manufacturers, ICT equipment and software applies to spending from 1 January 2027 to 31 December 2030.
• Small value assets. The value of each small asset that can be written off in one year rises from RM2,000 to RM3,000. For companies other than MSMEs, the overall yearly cap rises from RM20,000 to RM30,000, from YA 2027.

The reinvestment allowance, which many established manufacturers rely on when they expand, is being reviewed to make it "more targeted". No effective date has been announced.

Tax rate and financing for smaller firms

The MSME corporate tax rate falls by one percentage point from YA 2027: 14% on the first RM150,000 of chargeable income and 16% on RM150,001 to RM600,000. FMM puts the saving at up to RM6,000 a year per eligible company. Financing guarantees through SJPP and CGC total RM32 billion, part of business financing facilities that FMM says rise from RM50 billion to RM57 billion in 2027.

Floods, the power grid and Selangor projects

• The federal and Selangor governments agreed on five measures against Klang Valley flash floods, including assessing the capacity of the Batu Dam and the Klang Gates Dam for the next 30 years. As an immediate step, RM100 million goes to building retention ponds and maintaining rivers.
• TNB will invest RM15 billion to strengthen the national grid (PwC Malaysia Budget 2027 overview).
• The speech highlighted the RM1.25 billion New Economy Venture Fund set up by Sime Darby Property, EPF and LTAT to develop data centres and logistics assets in Elmina, Selangor.
• Wholly Malaysian-owned automotive vendors that relocate to the Automotive Hi-Tech Valley in Tanjong Malim can claim a tax deduction of up to RM5 million on relocation costs incurred from 1 January 2027 to 31 December 2030.

What industry says

The response from manufacturers was mixed (The Edge; Free Malaysia Today). FMM said it was disappointed that its proposed RM1.5 billion Smart Manufacturing Support Package for 2027 to 2030 was not adopted. It welcomed the MSME exemption but asked for clear guidelines and industry consultation on the RM2,500 wage, saying it should reflect job requirements, competence and productivity.

SME Malaysia cited its April 2026 survey: 76% of respondents said they were significantly affected by higher fuel and energy costs, and 45% expected cash-flow difficulty within three to six months. It asked for targeted utility assistance and temporary SST relief on commercial rental and leasing. Neither appears among the announced measures.

The Ministry of Finance's Economic Outlook 2027 adds that the push towards automation in labour-intensive industries will be "complemented by higher levy structures". Plants that depend on foreign workers should plan for more cost pressure on that side, not less.

What it means for factory owners, tenants and buyers

SME manufacturers and owner-occupiers. If your company's annual sales are below RM50 million, the RM2,000 minimum wage does not bind you from June 2027. SME Malaysia warns, though, that bigger employers raising pay will pull wages up anyway. In mixed clusters such as Klang, Shah Alam and Puchong, where small workshops and large plants hire from the same labour pool, budget for that.

Companies planning to expand or move. The ACA extension and the sales tax refund make 2027 to 2030 a sensible window to re-equip. If you are moving into a bigger factory, time machinery purchases to fall inside the ACA period and buy through channels that qualify for the refund. For the building itself, our Industrial Building Allowance guide explains what you can claim, and our factory set-up cost breakdown covers power upgrades, fit-out and approvals.

Tenants. Nothing in the budget lowers rent or the SST on rental. Rent stays a fixed cost, so check registered rents before you renew. Our industrial transactions page shows JPPH-registered sale prices and rents by area across Selangor, KL and Negeri Sembilan.

Buyers and investors. The RM100 million flood allocation is a first step, not a fix. When you buy in low-lying parts of the Klang Valley, still ask for the flood history of the specific lot and street. The Elmina fund and TNB's grid spending support demand for logistics and power-ready sites in Selangor over the medium term, but they do not move prices overnight.

Practical next steps

1. Check your annual sales against the RM50 million line, and ask your tax agent how "MSME" will be defined for the wage exemption and for the payroll rule.
2. If your company is not an MSME, move every salary payment to bank transfer or an approved cashless method well before YA 2028.
3. List the machinery and IT purchases planned for 2027 to 2030 and confirm which qualify for ACA.
4. Ask your local suppliers whether they will use the sales tax refund facility and pass the saving on in their prices.
5. Wait for the reinvestment allowance review details before signing off a large expansion that depends on it.
6. If your factory sits in a flood-prone area, keep insurance, drainage and loading bay levels under review.

FAQ

When does the RM2,000 minimum wage start?

From June 2027, according to the Budget 2027 speech. MSMEs with annual sales below RM50 million are exempted.

Does Budget 2027 reduce SST on factory rent?

No. SME Malaysia asked for temporary SST relief on commercial rental and leasing, but it is not among the announced measures.

Can a manufacturer now avoid sales tax on machinery bought from a local dealer?

From 1 January 2027, local traders and distributors that paid sales tax on machinery, spare parts and equipment supplied to manufacturers can claim a refund. That should let them sell at a lower price, but how much of the saving reaches you depends on the supplier.

Has the reinvestment allowance been cancelled?

No. It is under review to make it more targeted. No effective date has been given.

Is there anything for Klang Valley flooding?

Yes. RM100 million for retention ponds and river maintenance, plus a federal and Selangor plan that includes assessing the Batu Dam and Klang Gates Dam for the next 30 years.

FactoryHub is dedicated to helping every client find the right factory or warehouse. If you are deciding whether to rent, buy or expand in 2027, call Peter Tan (REN 12771) at 016-666 6872 or Jason Low (PEA 1478) at 012-288 1834.