Malaysia Budget 2027 Introduces Foreign Worker Compliance Measures and New Work Rights for Foreign Spouses

• Malaysia’s 2027 budget introduces new employer compliance measures aimed at reducing undocumented foreign worker employment and expands work authorization options for certain foreign spouses of Malaysian citizens.  

Foreign Worker Compliance 

The Government of Malaysia announced several workforce-related measures as part of the Fifth MADANI Budget 2027. Key developments include a new tax deduction requirement tied to payroll compliance, efforts to curb undocumented foreign worker employment and expanded employment opportunities for eligible foreign spouses residing in Malaysia.  

New Tax Deduction Requirement Linked to Wage Payments 

To help combat the employment of undocumented foreign workers, the government will introduce a new condition affecting wage-related tax deductions. Under the measure: 

• Companies other than micro, small and medium-sized enterprises (MSMEs) may claim tax deductions on wage expenses only if employee wages are paid through bank accounts permitted under the Employment Act 1955.  
• The requirement applies specifically to wage expenditure deductions. Other business expense deductions will not be subject to this condition.  

Foreign Spouses Granted Greater Access to Employment 

Malaysia’s 2027 budget expands workforce participation opportunities for certain foreign spouses of Malaysian citizens by easing employment eligibility requirements.

• Foreign spouses who hold a valid Long-Term Social Visit Pass (LTSVP) and have resided in Malaysia for at least one year may work without first obtaining a job offer.
• Eligible foreign spouses may seek employment without securing employer sponsorship.

Focus on Workforce Compliance 

The government introduced the payroll compliance measure to strengthen workforce oversight and reduce the employment of undocumented foreign workers.

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