Following the announcements made by the Ministry of Finance on amendments to Service Tax requirements, the Royal Malaysian Customs Department (RMCD) had issued Service Tax Policies (latest updated on 18 October 2025) to provide further guidance and details. The following are the key updates:
Construction services
| # | Exemptions | Conditions | ||
|---|---|---|---|---|
| 1 | The Federal government and state government are exempted from charging / paying for service tax. | None. | ||
| 2 | Local authorities are exempted from charging / paying service tax for the period from 1/07/2025 to 30/09/2025. Taxable services provided / received starting 1/10/2025 are subject to Service Tax. | None. | ||
| 3 | Non-reviewable contracts are exempted from Service Tax for the period 1/07/2025 to 30/06/2026. Taxable services provided from 1/07/2026 onwards are subject to Service Tax. | (a) Taxable services are provided by a registered person. (b) There is no clauses in the contract for price review/revision or any mechanism for adjusting the value of the contract. (c) The contract is written and signed before 1/07/2025 and stamped on or before 31/12/2025. (d) The contract states clearly the type of services, the fixed contract value and the contract period. (e) The contract continues to be effective after 1 July 2025. (f) If the contract has variation order, the exemption is applicable until 30/06/2026 provided that: (i) The variation does not affect the whole contract value; and (ii) The variation has been incorporated into the contract through a written document signed before 1/07/2025 and stamped before 31/12/2025. (g) If the contract has extension of time (EOT) , the exemption is applicable until 30/06/2026 provided that: (i) The EOT is provided on an original contract that complies with the conditions from (a) to (d); (ii) The original contract value does not change; (iii) The original contract ends before 1/07/2025; and (iv) The EOT document has been signed before 1/07/2025 and stamped before 31/12/2025. | ||
| 4 | The construction of residential buildings and public facilities related to those residential buildings within a mixed development project is exempted from service tax. | (a) Verification by a surveyor, architect, or any qualified person authorized under the relevant written law currently in force to determine the following components: (i) residential buildings; (ii) non-residential buildings; (iii) public facilities related to residential buildings; (iv) public facilities related to non-residential buildings; and (v) public facilities related to residential and non-residential buildings that are shared. (b) The apportionment to determine the portion for public facilities related to residential and non-residential buildings shall be made based on a prescribed formula. Non-residential built-up area / Total built-up area x 100 (c) The construction service contract between the developer or property owner and the construction contractor must be made in writing, signed and duly stamped. (d) The contract referred to in item (b) must clearly state that the construction is a mixed development project (comprising residential and non-residential buildings) and must include clauses relating to the scope of work, responsibilities, types of residential building construction, technical specifications, and pricing. (e) The developer or property owner must submit the following documents to the main contractor: (i) the pre-computation plan; or (ii) the approved planning permission letter issued by the local authority. (f) The developer or property owner and the main contractor must comply with any general directive issued by the Director General of Customs. | ||
| 5 | The business-to-business (B2B) exemption facility is granted for consultancy services under a design and build construction contract when such services are provided under a single contract that covers the entire scope of work supplied by the main contractor to the developer or landowner. Therefore, service tax is only imposed at the overall project cost level charged by the main contractor to the developer or landowner. | (a) The main contractor must be a person registered for service tax. (b) The consultants (service provider) must also be a person registered for service tax. (c) The consultancy services provided that qualify for this exemption are the taxable services listed based on prescribed services under Group G - Professional Services. (d) The main contractor must obtain copies of the planning permission letter, letter of award, contract, letter of acceptance, and other relevant documents related to the design and build construction work from the developer. (e) The reference numbers of the planning permission and the design and build construction contract offer must be stated in the invoice. (f) The exemption is only valid for the duration of the approval for the planning permission mentioned in paragraph (d). (g) The exemption only applies to construction projects based on the design and build model. (h) The main contractor must impose service tax on the developer or landowner for the construction services based on the total contract value obtained, at the prescribed tax rate. (i) This exemption may be applied directly through self-compliance. (j) The main contractor must comply with any general directive issued by the Director General of Customs. | ||
| 6 | The business-to-business (B2B) exemption facility on construction work for the period from 1/07/2025 to 31/08/2025 is granted to construction service providers who newly reach the registration threshold in July 2025 and have applied for service tax registration on or before 31/08/2025. | (a) A refund claim on service tax that has been declared and paid in the SST-02 return is allowed and must be submitted on or before 30/11/2025; and (b) The claim is made by the construction service provider after refunding the amount of service tax collected to the recipient of the construction service. |
Rental and leasing services
| # | Exemptions | Conditions |
|---|---|---|
| 1 | Federal government and state government are exempted from charging / paying for service tax. | This exemption only applies to rental or leasing services that take effect from 1/07/2025. |
| 2 | Local authorities are exempted from charging / paying service tax on rental or leasing services for the period from 1/07/2025 to 30/09/2025. Taxable services provided / received starting 1/10/2025 are subject to Service Tax. | This exemption only applies to rental or leasing services that take effect from 1/07/2025. |
| 3 | Non-reviewable contracts are exempted from Service Tax for the period 1/07/2025 to 30/06/2026. Taxable services provided from 1/07/2026 onwards are subject to Service Tax. | (a) Taxable services are provided by a person registered for service tax. (b) There is no clauses in the contract for price review/revision or any mechanism for adjusting the value of the contract. (c) The contract is written, signed and stamped on or before 9 June 2025. (d) The contract states clearly the type of services provided, the fixed contract value (not subject to changes) and the contract period. (e) The contract continues to be effective after 1 July 2025. |
| 4 | Exemption for tenants that are considered micro and small enterprises | (a) The tenant is required to declare and register via the MyPMK system that is developed by the RMCD. (b) Annual revenue of the Company is less than RM1 million, determined based on the latest assessed annual income declared (e.g. tax return) to the Inland Revenue Board. (c) The annual revenue shall be updated on a yearly basis with the RMCD (d) The tenant is responsible on information declared with the RMCD. (e) RMCD reserves the right to collect Service Tax if there is incorrect information. (f) Any other applicable conditions determined by the RMCD. |
| 5 | Group relief is granted to companies within a group that receives rental or leasing services from any other company within the same group, whether inside or outside Malaysia. | (1) If a company in a group of companies provides any rental or leasing services to any company in the same group of companies, such services are exempt from payment of service tax. (2) A Company is considered to have control on another Company where (a) The first Company owns more than 50% shareholding on the second Company via direct shareholding, indirect shareholding, or both direct or indirect via a subsidiary. (b) The first Company owns 20% - 50% shareholding on the second Company via direct shareholding, indirect shareholding, or both direct or indirect via a subsidiary. Further, the first Company has the power to appoint / terminate all or majority of the board of directors of the second Company. (2) The shares are classified as not held if they are held via a nominee, fiduciary in nature or for the purpose of obtaining debenture or borrowing activities. (3) Where a company is controlled by two or more companies, such company (second mentioned company) shall be taken to be controlled by the first mentioned company which has the exercisable power to appoint or remove all or a majority of directors in the board of directors in the second mentioned company. (4) If a company in a group of companies acquires rental or leasing services from any company other than foreign registered person within the same group of companies outside Malaysia, such service are exempted from payment of service tax. (5) If a company provides rental or leasing services to any person outside the group of companies, the same taxable services provided to any company outside or within the group of companies shall be a taxable services. Regardless, if a company provides rental or leasing services to another persons outside the group of companies, the same taxable service provided to any company within the group of companies shall be exempted from payment of service tax, provided that the total value of taxable services to another person outside the group of companies in that month and the eleven months immediately succeeding that month does not exceed 5% of the total value of taxable services. |
| 6 | Rental or leasing services of aircraft and ships are exempted from service tax. | (a) All aircraft are included except drones. (b) Ships include any vessel that sails or moves on or under water, but exclude floating storage units (FSU) and similar vessels. |
| 7 | The business-to-business (B2B) exemption facility on rental or leasing services for the period from 1/07/2025 to 31/08/2025 is granted to rental or leasing service providers who newly reach the registration threshold in July 2025 and have applied for service tax registration on or before 31/08/2025. | (a) A refund claim on service tax that has been declared and paid in the SST-02 return is allowed and must be submitted on or before 30/11/2025; and (b) The claim is made by the rental or leasing service provider after refunding the amount of service tax collected to the recipient of the rental or leasing service. |
Education services
| # | Exemptions | Conditions / Details |
|---|---|---|
| 1 | Charges or fees that are exempted from service tax are prescribed. | (1) Any private educational institution registered under the Education Act 1996, excluding (special school and language centre): a. Book charges; b. Uniform charges; c. Food and beverage charges; d. Transportation charges; e. Accommodation charges; f. Refundable deposit fees that are not part of the tuition fees; g. Parent-Teacher Association (PTA) fees; h. Fees for educational trips within or outside the country that are not part of the tuition fees; or i. Student pass or visa charges. (2) Higher education institution (registered under the Universities and University Colleges Act 1971 or Education Act 1996), private higher education institution (registered under the Private Higher Educational Institutions Act 1996) and any language centre (registered under the Education Act 1996): a. Book charges; b. Accommodation charges; c. Transportation charges; d. Food or beverage charges; e. Refundable deposit fees that are not part of the tuition fees; f. Fees for study tours within or outside the country that are not part of the tuition fees; or g. Student pass or visa charges. |
| 2 | Children and dependents of foreign diplomats are exempted from paying service tax on educational services. | Foreign diplomats are required to obtain a confirmation letter from the Ministry of Foreign Affairs to be submitted to private educational institutions or higher education institutions for the purpose of exemption from payment of service tax. |
| 3 | Exemption from service tax is granted on education fees or service charges that are fully sponsored by educational institutions, higher learning institutions, companies, foundations, or other organizations. | None. |
Private healthcare services
| # | Exemptions | Conditions |
|---|---|---|
| 1 | Consultation fees charged by professional doctors at registered private healthcare facilities, practitioners of traditional and complementary private medical practices, and private allied health services are exempted from the imposition of service tax. Any service tax previously collected from customers must be remitted to the Royal Malaysian Customs Department (RMCD). | The consultation fee must be separated from other medical treatment charges in the same invoice. |
| 2 | Providers of health screening management services for non-citizen workers such as FOMEMA are exempted from the payment of service tax. Private healthcare facilities providing health screening services for non-citizen workers through health screening management service providers are exempted from the imposition of service tax. Any service tax previously collected from customers must be remitted to the RMCD. | None. |
| 3 | Service tax exemption is granted to all foreign diplomats or international organizations and their dependents upon verification by the Ministry of Foreign Affairs. | (i) The implementation of the exemption is subject to a verification letter from the Ministry of Foreign Affairs issued to the foreign diplomat or international organization. (ii) A copy of the verification letter must be submitted by the foreign diplomat or international organization to the private hospital/clinic for record purposes. |
Financial services
| # | Exemptions | Conditions |
|---|---|---|
| 1 | Service tax exemption on all financial services in the First Schedule, Group H, Service Tax Regulations 2018, excluding the list of financial services in Appendix A of the Service Tax Policy (18/10/2025) for the period of 1/7/2025 until 30/9/2025. Please note that the provision of all financial services that are charged for fees, commissions, or similar payments is subject to service tax from 1/10/2025. | None. |
| 2 | Federal government and state government are exempted from charging / paying for service tax. | The exemption applies to services provided under the new scope expansion. Exemption from payment of tax does not apply to the services that were subject to tax before 1/07/2025. |
| 3 | Local authorities are exempted from charging / paying service tax for the period from 1/07/2025 to 30/09/2025. Taxable services provided / received starting 1/10/2025 are subject to Service Tax. | None. |
| 4 | Non-reviewable contracts are exempted from Service Tax for the period 1/07/2025 to 30/06/2026. Taxable services provided from 1/07/2026 onwards are subject to Service Tax. | (a) Taxable services are provided by a registered person. (b) There is no clauses in the contract for price revision or any mechanism for adjusting the value of the contract. (c) The contract is written, signed and stamped on or before 9/06/2025. (d) The contract states clearly the type of services, the fixed contract value (not subject to changes) and the contract period. (e) The contract continues to be effective after 1/07/2025. (f) The service mentioned is not subject to service tax prior to 1/07/2025. |
| 5 | Business to business (B2B) exemption between two financial service providers | (a) The service provider is a person registered under the Service Tax Act 2018; (b) The recipient of the service is the registered person specified in column (1), Group H, in the First Schedule of the Service Tax Regulations 2018; (c) The taxable financial services acquired are used for the purpose of providing the following services: (i) taxable financial services (ii) financial services in relation to goods, land or matters outside Malaysia excluding outwards remittance services; or (iii) financial services directly related to goods that are exported out of Malaysia. (d) This exemption does not apply if the acquired services are used for the provision of the following services: (i) brokerage services that are exempt from payment of tax related to stock trading; or (ii) services that are exempted from payment of tax as provided by Bursa Malaysia. |
| 6 | Exemption on imported financial services | (a) Taxable financial services are provided by non-Malaysian financial services provider; and (b) The recipient of the service is the registered person specified in column (1), Group H, in the First Schedule of the Service Tax Regulations 2018 (c) Taxable financial services obtained for the purposes or providing: (i) taxable financial services (ii) financial services in relation to goods, land or matters outside Malaysia excluding outward remittance services; or (iii) financial services directly related to goods that are exported out of Malaysia. (d) This exemption does not apply if the acquired services are used for the provision of the following services: (i) brokerage services that are exempt from payment of tax related to stock trading; or (ii) services that are exempted from payment of tax as provided by Bursa Malaysia. |
| 7 | Exemption on fees (clearance fee, trading fee, processing fee, perusal fee) with respect to trading of shares listed on Bursa Malaysia | None. |
| 8 | Exemption on fees charged in accordance with Syariah principles in the provision of Islamic financial services. | (a) Taxable services are provided by a registered person. (b) The financial service is: (i) Syariah-compliant; (ii) an Islamic financial service supporting other Islamic financial services that are primary Islamic financial services; and (iii) an integral part of the structure of the primary Islamic financial service for the purpose of compliance with Syariah principles. (c) The fees charged for the Islamic financial services are not comparable to the services offered conventionally; and (d) The fees are payments for the Islamic financial services described in paragraphs (b) and (c) and are not charged by the Islamic financial service provider separately from the main Islamic financial service structure. |
| 9 | Exemption on payment of service tax on management services for fixed price funds under Amanah Saham Nasional Berhad (ASNB) including Amanah Saham Bumiputera (ASB) and Amanah Saham Malaysia (ASM). | None. |
| 10 | Exemption from payment of service tax for fee-based financial services on transactions relating to securities issued and guaranteed by the Federal or State Governments. | (a) A financial service provider is a person registered under the Service Tax Act 2018 or a financial service provider outside Mallaysia; (b) The financial services for which fees are charged on the securities are directly related to : (i) Purchase, sale and transfer; (ii) Custody; (iii) Clearing; (iv) Settlement; (v) Administration of transactions. (c) The financial services are not advisory or consultation services. (d) Securities issued conventionally or syariah-compliant, which evidence indebtedness, namely: (i) Bonds/ sukuk; (ii) Debentures; (iii) Notes or other instruments. |
| 11 | Exemption from the payment of service tax on the acquisition of re-insurance services or re-takaful services by insurance companies or takaful companies. | (a) The service provider is a person registered under the Service Tax Act 2018 or financial service provider outside Malaysia; (b) The recipient of the service is the registered person specified in column (1), Group H, in the First Schedule to the Service Tax Regulations 2018; and (c) The re-insurance or re-takaful services acquired are used for the purpose of providing medical insurance, medical takaful, life insurance, or family takaful services. |
Please refer to this link for further details on the expansion of Sales and Service Tax.
