Summary
- Malaysia’s 2027 Budget proposes a sales-tax refund facility for traders and distributors supplying specified machinery, spare parts, equipment and selected raw materials to manufacturers, with the aim of reducing sourcing costs in domestic supply chains.
- The selected raw materials concern pharmaceutical products, animal feed, fertilisers and pesticides; detailed eligibility, documentation and refund mechanics remain dependent on implementing rules.
- From 1 January 2027, service tax on elderly-care services is proposed to fall from 8% to 6%, with an exemption for registered centres charging annual care fees of up to RM96,000 per person and 6% tax on amounts above that threshold.
Extended article
Malaysia’s Budget 2027 adopts a selective approach to indirect-tax relief rather than introducing a new tax or a broad restructuring of the sales and service tax regime. PwC and KPMG report a proposed sales-tax refund facility for traders or distributors supplying specified machinery, spare parts, equipment and raw materials to manufacturers. The identified raw-material categories relate to pharmaceutical products, animal feed, fertilisers and pesticides.
The refund mechanism is intended to reduce indirect-tax costs within qualifying domestic supply chains. Its practical application will depend on detailed rules covering eligible goods, qualifying suppliers and manufacturers, documentary evidence, claim procedures and the treatment of mixed or onward supplies. Businesses should wait for those rules before assuming that all tax embedded in trader-to-manufacturer supplies will be refundable.
The Budget also proposes relief for elderly-care services from 1 January 2027. The service-tax rate would decrease from 8% to 6%. Registered centres under the relevant care legislation would receive an exemption where annual care fees do not exceed RM96,000 per person; KPMG reports that amounts above the threshold would be taxed at 6%. KPMG also notes a proposed move of elderly-care services from Group C to Group I, while retaining the RM500,000 registration threshold. Operators should monitor the transitional rules for contracts, advance payments, invoices and services spanning the effective date.
Source
- PwC Malaysia: Tax in Motion – Budget 2027 Edition
- KPMG Malaysia: 2027 Budget – Indirect Tax Perspective
- KPMG TaxNewsFlash: Malaysia Proposed Tax Measures in 2027 Budget
- Malay Mail: Budget 2027 Relief for Elderly-Care Services
