Malaysia’s SST 2.0: What Changed in the 2025-2026 Service Tax Expansion

A wider net, phased in from March 2024 to January 2026

SST’s current shape came together in three moves. The service tax rate rose from 6% to 8% on 1 March 2024, with food & beverage, telecommunications, parking and logistics carved out and left at 6%. Then, from 1 July 2025, the scope itself expanded: rental and leasing of commercial assets, construction works, fee-based financial services, private healthcare for non-citizens and private education above certain fee levels all became taxable services for the first time: construction works, private healthcare and private education at 6%, rental and financial services at 8%. A proposed tax on beauty and wellness treatments was dropped before it took effect. Most recently, rental and leasing services were moved down to the 6% rate effective 1 January 2026, the same date the transitional grace period for the whole 2025 expansion ended.

Registration thresholds vary by category rather than applying a single number across the board. Most services register once taxable turnover exceeds RM500,000 over any rolling 12-month period — not a calendar year, and not just from the date a business starts tracking it. Food & beverage, construction and private healthcare carry a higher RM1.5 million threshold, leasing/rental and fee-based financial services sit at RM1 million, and credit or charge card services and taxable private education have no threshold at all.

The practical trap is that a business doesn’t need its own revenue to grow to end up newly liable. A company that leases office space, equipment or vehicles to others, or charges fees for financial advisory or arrangement work, may have crossed into scope purely because those activities were added to the tax net in July 2025 — even if its turnover from that activity hasn’t changed at all. Because Customs can assess the tax from the date the business should have been registered rather than the date it applies, waiting to check is the costlier option, not the safer one.

VIVOS (M) Sdn. Bhd. reviews a business’s activities against the current SST categories and thresholds as part of its accounting and tax service, so a newly taxable revenue stream gets flagged and registered before it becomes a backdated liability rather than after.

What changed in Malaysian service tax from July 2025 to October 2026?

The scope widened on 1 July 2025; since then rental has fallen to 6%, the MSME rental exemption has widened, the penalty-free period has ended and several construction and building items have been exempted. As at October 2026:

Date	Change
1 July 2025	Service tax extended to rental or leasing (8%), fee-based financial services (8%), construction (6%), private healthcare (6%) and private education (6%); 5% and 10% sales tax extended to more goods
31 December 2025	Exemption from compounds, prosecution and penalties for late registration, returns and payment on the new services ended
1 January 2026	Rental or leasing cut from 8% to 6%; MSME tenants with annual sales under RM1.5 million (previously RM1 million) exempt; new MSMEs exempt for 1 year
30 January 2026	Exemption for construction contracts signed before 1 July 2025 with no price-review clause extended to 30 June 2027
1 May 2026	Health examination management services taxable as management services
30 June 2026	Exemption for fixed-price rental contracts signed and stamped by 9 June 2025 ended
1 July 2026	Maintenance charges and sinking fund charged by a JMB or MC for non-residential buildings no longer subject to service tax

Budget 2027, tabled on 9 October 2026, proposes cutting service tax on elderly care services from 8% to 6%, with fees up to RM96,000 per person a year exempt, and a sales tax refund for traders supplying manufacturers, both from 1 January 2027; any SST change applies only once gazetted or issued as Customs policy.

Which 2025 categories are taxed, at what rate and above what threshold?

Each 2025 category has its own rate, 12-month registration threshold and carve-outs under the Service Tax (Amendment) Regulations 2025. As at October 2026:

Category	Rate	Threshold	Main exclusions and conditions
Rental or leasing of tangible assets	6% (8% until 31 December 2025)	RM1 million	Residential accommodation, reading materials, assets outside Malaysia and finance leases excluded
Construction works	6%	RM1.5 million	Residential buildings excluded; places of worship exempt; pre-1 July 2025 fixed-price contracts exempt to 30 June 2027
Fee-based financial services	8%	RM1 million	Fees, commissions or similar charges by financial service providers
Private healthcare, traditional and complementary medicine, allied health	6%	RM1.5 million	Malaysian citizens exempt; separately itemised doctors’ consultation fees exempt
Private education	6%	Nil	Schools charging over RM60,000 per student a year; higher education and language centres only for non-citizen students

Thresholds test the provider’s taxable services; the RM1.5 million rent figure tests the tenant’s annual sales.

Worked example: a consultancy that crosses RM500,000 in May 2026

The consultancy becomes liable at the end of May 2026, must apply by 30 June and charges 8% from 1 July 2026. The Sdn Bhd has a 31 December year end and bills RM36,000 a month from May 2025 to March 2026, RM62,000 in April 2026 and RM84,000 in May 2026.

1. End of April 2026: May 2025 to April 2026 totals 11 × RM36,000 + RM62,000 = RM458,000. Not yet liable.
2. End of May 2026: June 2025 to May 2026 totals 10 × RM36,000 + RM62,000 + RM84,000 = RM506,000. Liable.
3. Deadline: apply on MySST using form SST-01 by 30 June 2026, the last day of the following month.
4. Effective date: an application made in June takes effect on 1 July 2026.
5. Charging: a RM80,000 July invoice becomes RM80,000 + RM6,400 (8%) = RM86,400.
6. First return: the first taxable period is 1 July to 31 August 2026. Tax is due when payment is received, so RM160,000 received gives RM12,800 on SST-02, payable by 30 September 2026.
7. Late payment: unpaid, the RM12,800 attracts RM1,280 (10%) in the first 30 days, then RM1,920 (15%) twice, a maximum of RM5,120 (40%) after 90 days.
8. Registering late: if it applies only in December 2026, Customs can still assess tax from 1 July 2026: 8% of RM480,000 received July to December is RM38,400, never collected from clients.

A signed contract making more than RM500,000 likely over the next 12 months would have triggered liability earlier under the forward-looking test.

Who does not pay service tax on rent in 2026?

Qualifying MSME tenants, group companies and government do not, even where the landlord is registered (above RM1 million of rent in 12 months). As at October 2026:

• MSME tenants: exempt if annual sales declared to LHDN for the latest year of assessment are under RM1.5 million (RM1 million before 1 January 2026) and the tenant has declared its status in MyPMK.
• New MSMEs: exempt for 1 year from SSM registration, from 1 January 2026, if paid-up capital is RM2.5 million or less and other MSME conditions are met.
• Group companies: rent within a group is exempt where one company holds more than 50% of another, or 20–50% with board control, and rent to outsiders is no more than 5% of the total.
• Government: the Federal and State Governments are exempt.
• Ended: fixed-price contracts signed and stamped by 9 June 2025 were exempt only until 30 June 2026.
• Joint owners: co-owners invoicing separately each test their own share; a party issuing a single undivided invoice is the provider.

How do you register and file service tax? A checklist

Register on MySST with form SST-01, then file SST-02 and pay electronically every two months, under Customs Public Ruling No. 6/2026 (21 September 2026).

1. Each month, total taxable services for that month and the previous 11, estimate the next 11, and compare both with your threshold.
2. Check exemptions, such as a tenant’s MyPMK status or group relief, and keep the evidence.
3. Apply on MySST by the last day of the month after the month you became liable.
4. From the effective date, show service tax separately on every invoice.
5. File SST-02 for each two-month taxable period by the last day of the following month, including nil returns.
6. Pay by the same date, normally by FPX through MySST.
7. Keep records for 7 years: failure carries a fine of up to RM50,000, up to 3 years’ imprisonment, or both.
8. Correct past errors by voluntary disclosure on form SST-ADM.

Common SST mistakes after the 2025 expansion

Most errors come from reading the 2025 rules too broadly.

• Treating the grace period as a tax holiday: it waived penalties until 31 December 2025, but tax was due from 1 July 2025.
• Using the calendar year: the test is any month plus the previous 11, or the next 11.
• Treating RM1.5 million as the landlord’s threshold: landlords register above RM1 million; RM1.5 million is the tenant’s sales limit for the MSME exemption.
• Charging 8% on rent for periods from 1 January 2026: the rate is 6%.
• Assuming private education has a turnover threshold: a school charging over RM60,000 per student must register whatever its size.
• Charging tax on manicures, facials or hairdressing: the beauty services expansion was dropped before 1 July 2025.

Malaysian SST terms explained

Key terms in Customs’ service tax rules:

• Taxable service: a service listed in the First Schedule to the Service Tax Regulations 2018, from Group A (accommodation) to Group M (education).
• Registration threshold: the 12-month value of taxable services above which registration is compulsory; nil for some services.
• Taxable period: the two-month period covered by each SST-02 return; the first can be shorter.
• MyPMK: the system in which MSME tenants declare their status to claim the rental exemption.
• Non-reviewable contract: a written, stamped, fixed-price contract with no price-review clause.