As part of Malaysia's effort to enhance revenue collection and align with current economic developments, the Royal Malaysian Customs Department (RMCD) has announced new guidelines for Service Tax (SST) affecting five major sectors: Construction Work, Rental/Leasing Services, Education Services, Private Health-related Services, and Financial Services. These changes will come into effect starting 1 July 2025. Here's a comprehensive overview for businesses and individuals impacted by the updated tax regime.
📅 Effective Dates
-
1 July 2025: Construction, Rental, Education, Financial (Phase 1), and Health-related services become subject to SST.
-
1 August 2025: Health-related services – transitional period begins.
-
1 September 2025: Financial Services Phase 2 expansion.
📊 Key SST Rates and Registration Thresholds
|
Sector
|
SST Rate
|
Registration Threshold
|
|
Construction
|
6%
|
RM1.5 million/year
|
|
Rental/Leasing
|
8%
|
RM500,000/year
|
|
Education
|
6%
|
RM60,000 per student/year
|
|
Private Health Services
|
6%
|
RM1.5 million/year
|
|
Financial Services
|
8%
|
RM500,000/year (except card fees)
|
🔹 Construction Services
Taxable:
-
Commercial buildings, infrastructure, ports, mixed-use developments
-
Facility management during construction
Not Taxable:
Other Notes:
-
Retention sums: taxable when released
-
Liquidated damages (LAD): not taxable
-
B2B exemption if subcontractor and contractor are registered
-
Transitional rules for ongoing projects
🔹 Rental and Leasing Services
Taxable:
Not Taxable:
Exemptions:
🔹 Education Services
Taxable:
-
Private institutions charging > RM60,000/year per student
-
Higher education and language centres serving non-Malaysians
Not Taxable:
-
Malaysian citizens, OKU holders
-
Preschool and special needs education
-
Short courses (under 3 months/20 hours)
Note: Imported education services are taxable; scholarships do not exempt the institution from tax if fees exceed the threshold.
🔹 Private Health-Related Services
Taxable:
Not Taxable:
Other Notes:
-
Service tax applies where service is rendered to foreigners
-
Location rules: services within/between Designated or Special Areas may be exempt
-
Transitional guidance applies for services crossing 1 August 2025
🔹 Financial Services
Taxable (Phase 1 - 1 July 2025):
-
Loan/credit facilities, Islamic financing
-
Insurance and takaful (certain policies)
-
Investment advice, fund management, brokerage, underwriting
Expanded Scope (Phase 2 - 1 Sept 2025):
Not Taxable:
-
Interest/profit from loans
-
Late payment charges
-
Basic banking (ATM, account maintenance)
-
Services linked to exports, offshore assets
-
Intra-group transactions
-
Services to the Government
Imported Services:
📣 What Businesses Should Do
-
Review all services provided against SST thresholds
-
Register via MySST if thresholds are exceeded
-
Issue tax invoices with correct tax codes
-
Apply for exemptions (B2B, government, residential, special areas)
-
Comply with transitional rules and maintain proper accounting
📖 Final Thoughts
The new SST measures reflect a significant evolution in Malaysia's tax framework, impacting a wide range of industries. Whether you're in construction, education, leasing, finance, or healthcare, understanding your obligations is crucial. Timely registration and record-keeping will be essential to ensure compliance and avoid penalties when these changes come into force starting 1 July 2025.
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