Malaysia’s Ministry of Finance has issued updated SST guidelines, including a reduced service tax on rental and leasing for MSMEs, exemptions on critical raw materials for manufacturers, extended tax relief on certain construction contracts, and a service tax exemption for building places of worship.
Malaysia’s Ministry of Finance released updated policy notices on sales and services tax (SST) on 5 January 2026.
The key updates are as follows:
- Effective 1 January 2026, the service tax on rental and leasing services will be revised to support the industry. The current rate of 8% will be lowered to 6%, while the annual sales threshold for MSME tenants exempt from service tax will increase from RM1 million to RM1.5 million. Additionally, newly established MSMEs will benefit from a one-year exemption from service tax on rental or leasing services, effective from their registration date.
- From 1 January 2026, sales tax will be exempted on critical raw materials and inputs used by registered manufacturers. This measure is intended to help stabilise the prices of essential goods for the broader population. It applies to materials used in the production of livestock and agricultural products, including animal feed, fertilisers, and pesticides.
- The service Tax on construction contracts signed before 1 July 2025 that do not contain reviewable clauses and were exempt from 1 July 2025 to 30 June 2026 will be extended by one more year to 30 June 2027. This means that construction service agreements signed before the SST expansion can enjoy a 2-year exemption from service tax.
- From 1 July 2025, construction services for places of worship, including mosques, temples, churches, and shrines, will be exempt from service tax.
