Budget 2027 for SMEs: what it means for software and AI

What did Budget 2027 propose for SMEs adopting software and AI?

Four measures are directly relevant. An MDEC fund for AI adoption, an extended Accelerated Capital Allowance that covers ICT equipment and software, lower income tax rates for MSMEs, and a higher limit for small value assets. All tax measures are proposals until the Finance Bill is passed.

The Budget was tabled in the Dewan Rakyat on Friday, 9 October 2026. The Ministry of Finance publishes the speech and a separate tax measures document; the tax measures document is the one that sets out current positions, proposals and effective dates, and it is the better source for anything you plan to claim.

The rest of this article takes each measure in turn, quoting the official wording, and then lists what a business can sensibly do now. Where a detail has not been published, such as how to apply for the MDEC fund, we say so rather than guess.

• MDEC AI fundRM30 million to help 4,000 MSMEs adopt AI and automate operations, and to train and certify 5,000 AI professionals.
• Accelerated Capital AllowanceExtended for qualifying spending from 1 January 2027 to 31 December 2030 (Tax measures, Appendix 28).
• MSME tax ratesFirst RM150,000 from 15% to 14%; RM150,001 to RM600,000 from 17% to 16%, from YA 2027 (Appendix 11).
• Small value assetsPer-asset limit raised from RM2,000 to RM3,000 from YA 2027 (Appendix 12).

What is the MDEC RM30 million AI fund?

The Budget speech says an "MDEC fund of 30 million ringgit will help 4,000 MSMEs adopt AI and automate their operations" and will also train and certify 5,000 AI professionals. As of 30 October 2026, MDEC had not published application rules, eligibility criteria or a matching ratio for it.

The speech gives the size of the fund and its target, not the mechanics. Until MDEC publishes guidelines, nobody can tell you whether it will be a matching grant, a voucher or a subsidised programme, or which costs it will cover. Treat any article that states those details as speculation.

What you can do now is prepare the case you would make under any of those formats. Pick one process that AI or automation would improve, such as answering repeated WhatsApp enquiries or producing quotations, and record how many hours it takes today. Gather the documents and data the system would need, and get a written scope and quotation. A business that can describe the problem, the measure of success and the cost will be ready when the rules appear.

Does the Accelerated Capital Allowance cover software?

The current Accelerated Capital Allowance lists the purchase of ICT equipment and computer software packages, and consultation, licensing and incidental fees for developing customised software. It gives a 20% initial and 40% annual allowance so the spending is claimed within two years. Budget 2027 proposes extending it to spending incurred up to 31 December 2030.

According to Appendix 28 of the tax measures document, the incentive currently applies to qualifying capital expenditure incurred from 11 October 2025 until 31 December 2026. The proposal is to extend it for four years, for qualifying capital expenditure incurred from 1 January 2027 until 31 December 2030.

The practical consequence is timing and paperwork, not a discount. If you are planning a system, ask your supplier to separate software package licences, custom development and consultation fees on the quotation and invoice, because those lines may be treated differently. Ask your tax adviser how the allowance applies to your company before you budget around it; capital and revenue treatment of software spending depends on the facts of each case.

How do the lower MSME tax rates and small asset limit work?

From year of assessment 2027, MSMEs are proposed to pay 14% on the first RM150,000 of chargeable income and 16% on RM150,001 to RM600,000, down one point each. The rate above RM600,000 stays at 24%. Separately, the per-asset limit for small value assets rises from RM2,000 to RM3,000.

The tax measures document defines MSMEs as companies with paid-up ordinary share capital of RM2.5 million and below, or LLPs with partnership capital of RM2.5 million and below, with annual sales not exceeding RM50 million.

The small value asset change matters for equipment such as laptops, tablets and point-of-sale hardware bought for a new system. Assets up to the limit can have their capital allowance claimed in full. MSMEs already have no overall annual cap on these claims; for other companies the cap rises from RM20,000 to RM30,000 a year.

What should an SME do before buying software in 2027?

Decide on the problem first and the incentive second. Scope one workflow, get an itemised quotation that separates licences, custom development and consultation, check e-Invoice obligations, and confirm the tax treatment with your adviser. Then watch MDEC for the AI fund rules before committing spending you hope it will cover.

Incentives change the timing and net cost of a project; they do not make an unsuitable system worthwhile. Buy software because it removes a measurable cost or risk, and use the allowances to improve the cash flow of a decision you would make anyway.

If your invoices will come from a new system, check your e-Invoice phase on LHDN's timeline, which currently exempts taxpayers with annual turnover or revenue below RM3,000,000. Macoin can scope a first release and itemise the quotation so your adviser can assess it. Send the workflow you want to change through WhatsApp.