Tax & AccountingJuly 24, 2025

Service tax (SST) expansion in Malaysia: key implications for businesses

By: Lochana Nanthacumar

Effective 1 July 2025, Malaysia expanded its service tax to include several new categories. This expansion aims to streamline tax compliance and broaden the tax base. Below are the key changes and takeaways for each taxable service.
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Table of contents

Rental or leasing services

From 1 July 2025, rental or leasing services will be subject to an 8% service tax. Registration is required when the total value of taxable services reaches RM1,000,000 per year. Exemptions include residential properties, reading materials, tangible assets outside Malaysia, financial leasing arrangements and rentals within Special and Designated Areas.

Key takeaways:
  • 8% service tax on rental or leasing services.
  • Registration required at RM1,000,000 threshold.
  • Exemptions for residential properties and financial leasing.
  • B2B exemption for subletting tangible assets.

Construction services

From 1 July 2025, all construction services, including those for residential buildings on mixed development land, will be subject to service tax. The Royal Malaysian Customs Department has issued policies outlining exemptions and temporary waivers for certain tax-related mistakes until the end of 2025.

Key takeaways:
  • 6% service tax on construction services.
  • Exemptions for federal or state government services.
  • RM1,500,000 threshold for registration.
  • Mixed development projects will be taxed.
  • Temporary waiver of penalties until end of 2025.
  • Exemptions for non-reviewable contracts signed before 9 June 2025.

Education services

From 1 July 2025, education services provided by institutions registered under the Education Act 1996 will be subject to a 6% service tax if charges exceed RM60,000 per student per academic year. Exemptions apply to special education schools, language centres and services for Malaysian citizens and OKU cardholders.

Key takeaways:
  • 6% service tax on education services.
  • Applies to private preschools, primary/secondary schools and international schools.
  • Exemptions for special education schools and language centres.
  • Malaysian citizens and OKU cardholders are exempted.
  • Temporary waiver of penalties until end of 2025.
  • Specific charges or fees related to education are exempted.

Financial services

Under Group H: Finance, an 8% service tax will be imposed on financial services from 1 July 2025. This includes banking and insurance services by regulated and unregulated providers.

Key takeaways:
  • 8% service tax on financial services.
  • Includes banking and insurance services.
  • Registration required at RM1,000,000 threshold.
  • RM25 per year tax on credit or charge cards.
  • Fee commission-based financial services now taxable.
  • Temporary waiver of penalties until end of 2025.
  • Exemptions for federal and state governments.
  • Non-reviewable contracts signed before 9 June 2025 exempt until 30 June 2026.

Healthcare services

From 1 July 2025, a 6% service tax will apply to healthcare services provided to non-Malaysians. This includes services offered by private hospitals, traditional medicine practitioners and allied health professionals. Exemptions apply to services provided by the government or universities and those offered to Malaysian citizens.

Key takeaways:
  • 6% service tax on healthcare services for non-Malaysians.
  • Applies to private hospitals, traditional medicine practitioners and allied health professionals.
  • Registration required if total taxable services exceed RM1.5 million over 12 months.
  • Temporary waiver of penalties until end of 2025.
  • Exemptions for government and university-provided healthcare and services for Malaysian citizens.
  • Taxable services include medical, dental, nursing, allied health, pharmaceutical, ambulance, accommodation, diagnosis, treatment, preventive health, consultation fees, medical tools, meals and mortuary services.
  • Exemptions for university medical centres and government-run facilities.
  • Healthcare services in designated or special areas (excluding Pulau 1) exempt from service tax.
Lochana Nanthacumar
Lochana Nanthacumar
Content Management Analyst, Wolters Kluwer Tax & Accounting Asia Pacific
Lochana joined Wolters Kluwer in 2019 and is responsible for writing and editing Wolters Kluwer's Sales and Service Tax, Tax cases, Asia Tax and Accounting content.

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