Malaysia’s Inland Revenue Board has issued Public Ruling No. 8/2025, outlining the classification and tax treatment of micro, small, and medium enterprises (MSMEs), including LLPs, and clarifying their treatment under the Income Tax Act 1967.
The Inland Revenue Board of Malaysia (IRBM) released Public Ruling No. 8/2025 on 22 December 2025, providing guidance on the classification and tax treatment of micro, small, and medium-sized companies or enterprises (MSMEs), including limited liability partnerships (LLPs).
The objective of this Public Ruling (PR) is to provide an explanation of the specific criteria and tax treatment for certain companies under the Income Tax Act 1967 (ITA). The companies referred to here include micro, small and medium companies (MSMCs), including limited liability partnerships (LLPs). General provisions for companies and LLPs under the ITA, or specific provisions under the ITA or regulations set for companies and LLPs in certain industries conducting activities such as banking, insurance/takaful, developers and contractors, shall apply where relevant.
Micro, small and medium enterprises in general
The National Entrepreneur and Small and Medium Enterprise Development Council (NESDC) is the highest policy-making body with its strategic function covering the development of micro, small and medium enterprises (MSMEs) holistically and co-ordinately across all economic sectors in Malaysia since 2004. NESDC was established under section 2A of the Small and Medium Enterprises Corporation Malaysia Act 1995 [Act 539].
Meanwhile, the Small and Medium Enterprises Corporation Malaysia (SME Corporation Malaysia) acts as the central coordinating agency under the Ministry of Development and Cooperatives, which is responsible for coordinating and leading the implementation of progressive MSME development programs to enhance the creation of the nation’s prosperity and social well-being.
The definition of MSMEs according to the Guidelines for the Definition of SME issued by SME Corp. Malaysia that has been streamlined from 1.1.2014 following global economic developments such as price inflation, structural changes and changes in business flow as follows:
| Sector/Operation size | Micro | Small | Medium |
| Manufacturing | Annual sales
less than RM300,000 or total full-time employees less than 5 people |
Annual sales
from RM300,000 to less than RM15 million or total full-time employees from 5 to less than 75 people |
Annual sales
from RM15 million to not exceeding RM50 million or total full-time employees from 75 to not exceeding 200 people |
| Services and other sectors | Annual sales
from RM300,000 to less than RM3 million or total full-time employees from 5 to less than 30 people |
Annual sales
from RM3 million to not exceeding RM20 million or total full-time employees from 30 to not exceeding 75 people |
Apart from the eligibility criteria mentioned above of this PR, MSMEs are also required to meet two additional qualifications, namely:
Type of establishment
A business entity that exists and is registered with the following bodies:
(a) Companies Commission of Malaysia, whether under the Companies Act 2016 [Act 777], the Business Registration Act 1956 [Act 197], or the LLPA;
(b) authorities or district offices in Sabah and Sarawak;
(c) statutory body for professional service providers.
Shareholding structure
A business entity can be considered an MSME except:
(a) a public listed company on the main market on the Bursa Malaysia and its subsidiaries; or
(b) subsidiaries of multinational companies, Government-linked companies, Minister of Finance Companies (Incorporated) and state-owned enterprises.
Micro, Small and Medium Companies under the ITA (Income Tax Act 1967)
The ITA does not have a definition for MSMEs but the ITA provides special tax treatment for MSMCs. For the purpose of this PR, MSMCs consist of companies including LLPs that are resident and incorporated (for companies) or registered (for LLPs) in Malaysia.
