Malaysia: MoF announces sales and service tax amendments

Malaysia’s Ministry of Finance announced on 9 June 2025 revisions to the sales tax and an expanded scope for the service tax, set to take effect on 1 July 2025. This measure aims to strengthen the country’s fiscal position by increasing revenue and broadening the tax base.

This follows the finance ministry’s decision to postpone its planned expansion of the sales and service tax (SST) on 1 May 2025. The ministry said the SST would be implemented later.

The revision of the sales tax and the expansion of the service tax scope encompass the following:

• The sales tax rate remains unchanged for essential goods consumed by the public.
• The sales tax at 5% or 10% will apply to discretionary and non-essential goods.
• The scope of the Service Tax will be expanded to include new services such as leasing or rental, construction, financial services, private healthcare, education, and beauty services.

Service Tax rates and thresholds 

For services, the applicable Service Tax rates and thresholds are:

• Rental or leasing of tangible assets: 8% tax rate with a MYR 500,000 annual revenue threshold. Exemptions include housing accommodation, reading materials, assets outside Malaysia, and financial leases.
• Construction services: 6% tax rate with a MYR 1.5 million revenue threshold, excluding the construction of residential buildings and related public facilities.
• Financial services: 8% tax rate with a MYR 500,000 revenue threshold for most services.
• Beauty services: 8% tax rate with a MYR 500,000 annual revenue threshold.

Sales tax rate on essentials

In another Ministry of Finance release, essential goods like rice, vegetables, and medicine will remain exempt from sales tax. At the same time, a 5% rate applies to items like imported fruits, essential oils, fish (king crab, salmon, cod), and silk. Premium items, such as racing bicycles and antique art, will be taxed at 10%.

Sales tax on local fruits

The Ministry of Finance clarified that locally grown fruits in Malaysia are exempt from sales tax under the expanded Sales and Service Tax (SST), as they are not manufactured goods. However, imported fruits, including tropical varieties like bananas and pineapples, are subject to sales tax.

Updated registration guidelines for service tax expansion

The release clarifies registration requirements for companies newly subject to Service Tax under the expansion. Companies not currently registered for the newly introduced taxable services must determine if they reached the revenue threshold within 12 months. If the threshold is met in July, they must register by August 2025 and start charging Service Tax from 1 September 2025. A grace period until December 2025 will allow companies to make genuine efforts to comply and avoid penalties.