FMM Wants SME Limit Raised to RM100 Million and a Review of SME Tax Before Budget 2027

Malaysia's biggest manufacturing lobby wants the government to stop treating "SME" as a box that growing companies are afraid to outgrow. A day before Budget 2027 is tabled, the Federation of Malaysian Manufacturing (FMM) has called for a review of the SME corporate tax threshold and repeated its push for a much wider definition of what counts as a manufacturing SME.

The call came on 8 October 2026 at the launch of FMM's Small and Medium Industries Conference (SMIC) 2026 in Kuala Lumpur, themed "Road to RM100 Million Revenue: Frameworks, Talent & Capital for the Next Stage of Business Growth". Entrepreneur and Cooperatives Development Minister Steven Sim launched the event, which FMM said drew more than 300 business leaders, entrepreneurs, policymakers and industry players.

What FMM is asking for

FMM president Jacob Lee Chor Kok used the stage to argue for a new growth agenda, one that helps Malaysian firms scale into stronger SMEs, then mid-tier companies and eventually national champions, rather than staying small to keep their support. According to reports of the speech and FMM's earlier Budget 2027 proposals, the main asks are:

• A bigger SME definition for manufacturers: raise the threshold to annual sales turnover of up to RM100 million and up to 300 full-time employees, and apply it consistently across government support programmes.
• A review of the SME corporate tax threshold: FMM argues that leaving more capital inside companies lets them reinvest, innovate and expand.
• Lower tiered tax rates for qualifying SMEs: in its pre-budget proposals, FMM suggested 15% on the first RM1 million of chargeable income, 17% on the next RM1 million and 24% after that.

"Ultimately, it is about helping more companies move from RM10 million to RM50 million, and from RM50 million to RM100 million in annual revenue." FMM president Jacob Lee Chor Kok, as reported by Borneo Post

Why the threshold matters

The argument is about the awkward middle stage. A company that grows past the current SME limits can lose access to grants, cheaper financing schemes and lower tax rates at exactly the moment it is spending heavily on machines, people and new markets. FMM says its proposal is less about changing numbers and more about recognising today's business costs and keeping support in place during the hardest phase of expansion.

The conference itself was built around four pillars, frameworks, talent, capital and technology, with sessions on scaling, financing growth, digital transformation and workforce development.

What this means for Malaysian readers

If you run or work at a small manufacturer, this is one to watch on Friday. Nothing changes until the government actually adopts it, and Budget 2027 may or may not include any of FMM's asks. But if the SME definition is widened, more mid-sized factories could qualify for SME-only programmes, and a lower tax bill on the first RM2 million of profit would leave more cash for automation and hiring. For suppliers, agencies and service providers, a healthier mid-tier manufacturing base usually means more customers who can afford to invest in upgrades.

Smaller firms should also note the direction of travel: the conversation is shifting from simply protecting SMEs to helping them grow. That makes clean books, digital systems and a clear growth plan more valuable when applying for whatever support comes next.

Source: Borneo Post, with background from FMM's Budget 2027 proposals as reported by BusinessToday. This post is a summary written in our own words.