Insights · Malaysia Tax
Malaysia’s SST 2.0: What Changed in the 2025-2026 Service Tax Expansion
Malaysia’s Sales and Service Tax net widened sharply from 1 July 2025, the grace period for the new rules ended on 31 December 2025, and rental/leasing services got a rate cut on top of that from 1 January 2026 — if your business only checked its SST position once, it’s worth checking again.
| Requirement | What it means |
|---|---|
| Standard sales tax rate | 10% on most taxable goods |
| Reduced sales tax rate | 5% on selected goods, including certain foodstuffs, construction materials and consumer items |
| Zero-rated goods | Essentials such as rice, basic foodstuffs, medicines and books |
| Standard service tax rate | 8%, applying to most taxable services, in place since 1 March 2024 |
| Reduced service tax rate | 6%, for food & beverage, telecommunications, parking and logistics, and (since 1 January 2026) rental and leasing services |
| Newly taxable from 1 July 2025 | Rental/leasing of commercial assets, construction works, fee-based financial services, private healthcare for non-citizens, private education (fees over RM60,000/year or non-citizen students), and wellness centre treatments |
| Registration thresholds | RM500,000 for most services; RM1 million for leasing/rental and fee-based financial services; RM1.5 million for food & beverage, construction, private healthcare and education; no threshold for credit/charge card services |
| Grace period | Ended 31 December 2025; full enforcement began 1 January 2026 |
| Penalties | Up to RM50,000 in fines, up to 3 years’ imprisonment, or both, for registration or filing failures; liability is backdated to the date turnover crossed the threshold, not the date of application |
A wider net, phased in over 18 months
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, private education above certain fee levels, and wellness centre treatments all became taxable services for the first time, initially at the 8% rate. 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, private healthcare and education carry a higher RM1.5 million threshold, leasing/rental and fee-based financial services sit at RM1 million, and credit or charge card services 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 liability is backdated to the date the threshold was actually crossed rather than the date of registration, 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.
Frequently asked questions
Did the SST rate go up or down in 2026?
Both, depending on the service. The main service tax rate has been 8% since 1 March 2024, but rental and leasing services — added to the tax net in July 2025 at that 8% rate — were reduced to 6% effective 1 January 2026, alongside food & beverage, telecommunications, parking and logistics, which have stayed at 6% throughout.
What new services became taxable in July 2025?
Rental or leasing of commercial assets, construction works, fee-based financial services, private healthcare for non-citizens, private education (where fees exceed RM60,000 a year or the student isn’t a Malaysian citizen), and wellness centre treatments all entered the service tax net from 1 July 2025.
What’s the registration threshold for SST?
It depends on the category. Most services register once taxable turnover exceeds RM500,000 over any 12 months; food & beverage, construction, private healthcare and private education carry a RM1.5 million threshold; leasing/rental and fee-based financial services sit at RM1 million; credit and charge card services have no threshold at all.
What happens if we should have registered but didn’t?
Liability is backdated to the date your turnover actually crossed the threshold, not the date you apply, and the grace period for the 2025 expansion ended on 31 December 2025. Registration or filing failures can draw a fine of up to RM50,000, up to three years’ imprisonment, or both.
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