What changed in service tax from 1 July 2025?
From 1 July 2025 Customs extended service tax to rental or leasing (8%), financial services (8%), beauty treatment (8%), construction (6%), private healthcare (6%) and private education (6%), subject to thresholds and exclusions. Sales tax rates changed on the same date, with unlisted goods taxed at 10%.
Malaysia broadened service tax from 1 July 2025. Customs' FAQs on the expansion give these rates and thresholds.
| Service | Rate | Registration threshold |
|---|---|---|
| Rental or leasing | 8% | RM500,000 |
| Financial services | 8% | RM500,000 |
| Beauty treatment | 8% | RM500,000 |
| Construction work (not residential buildings) | 6% | RM1.5 million |
| Private healthcare and related services | 6% | RM1.5 million |
| Private education | 6% | Fees above RM60,000 per student per year |
Exclusions and exemptions (examples from the FAQs)
- Residential property rent is not taxed; only the commercial part of a mixed rental is.
- Interest, late-payment charges and some other financial charges are excluded.
- Construction of residential buildings and related public areas is outside the tax, and the Federal and State Governments and local authorities are exempt for construction.
- Education provided by the government is outside the tax.
Registration. Private education providers could register from 1 August 2025 by submitting SST-01 through MySST.
Who is affected: landlords of commercial premises, equipment lessors, contractors, firms charging financial fees, beauty and wellness providers, private schools and clinics.
Sales tax also changed on 1 July 2025: items listed at 5% or a specific rate, and goods in neither the rate order nor the exemption order at 10%.
Use the FAQ for your own service to confirm the exact scope.
Legal basis
- Service Tax Act 2018
- Service Tax (Amendment) Order 2025
Sources
Applies to 2025 onwards · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What personal income tax rates apply to business owners in Malaysia?Resident individuals pay progressive tax from 0% on the first RM5,000 up to 30% on income above RM2 million. Non-residents pay a flat 30%. The rates apply to total chargeable income after reliefs.
- Who must register for sales tax in Malaysia and what are the rates?Sales tax is charged on taxable goods made in Malaysia by registered manufacturers and on taxable imports. Rates are 5%, 10% or a specific rate; since 1 July 2025, goods not listed in the 5% or specific-rate orders are taxed at 10%. A manufacturer must register once taxable sales exceed RM500,000 in 12 months.
- When does my business have to register for service tax in Malaysia, and at what rate?Service tax is charged on listed taxable services at 8%, except 6% for food and beverage, logistics, telecommunications, parking, construction, private healthcare and private education. Registration depends on the service: RM500,000 in 12 months for rental or leasing and financial services, RM1.5 million for food and beverage, construction and private healthcare, and private schools charging over RM60,000 per student a year.
- How does real property gains tax (RPGT) work in Malaysia?RPGT is charged on gains from disposing of land, buildings and shares in real property companies. Rates fall with the holding period. For Malaysian citizens and PRs it is 30%, 30%, 20%, 15% in years 1 to 5, and nil from the 6th year. Companies pay 10% from year 6.
- What tax incentives can a Malaysian SME realistically use?Most major incentives, such as pioneer status, investment tax allowance and reinvestment allowance, target manufacturing and approved activities and need approval. Pioneer status exempts 70% of statutory income for five years; reinvestment allowance gives 60% of qualifying spending for established manufacturers.