Updates on Service Tax Policies

June 30, 2025
10:53 am

Following the recent announcements made by the Ministry of Finance on amendments to Service Tax requirements, the Royal Malaysian Customs Department (RMCD) had issued new Service Tax Policies to provide further guidance and details. The following are the key updates:

Construction services

#	Exemptions	Conditions
1	Exemption from penalty, compound and legal action until 31 December 2025 for the following (a) Late registration (b) Late submission of SST return (c) Late payment (d) Incorrect declaration (under reporting / Service Tax underpaid) (e) any mistakes with respect to invoice, debit note and credit note	(a) The offences are identified by RMCD or voluntary declared by the Company. (b) Not applicable on fraud or willful evasion (c) Application for remission should be made to the RMCD based on applicable procedures.
2	Federal government and state government are exempted from charging / paying for service tax.
3	Local authorities are exempted from charging / paying service tax for the period from 1 July 2025 to 30 September 2025. Taxable services provided / received starting 1 October 2025 are subject to Service Tax.
4	Non-reviewable contracts are exempted from Service Tax for the period 1 July 2025 to 30 June 2026. Taxable services provided from 1 July 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 June 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 July 2025. (f) If the contract has variation order, the exemption is applicable provided that: (i) The changes is technical in nature and does not affect the whole contract value; and (ii) The changes has been included as a written addendum document to the contract and has been signed and stamped on or before 9 June 2025. (g) If the contract has extension of time (EOT) , the exemption is applicable 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 on or before 9 June 2025; and (iv) The EOT document has been signed and stamped before the end of the original contract.

Rental and leasing services

#	Exemptions	Conditions
1	Exemption from penalty, compound and legal action until 31 December 2025 for the following (a) Late registration (b) Late submission of SST return (c) Late payment (d) Incorrect declaration (under reporting / Service Tax underpaid) (e) any mistakes with respect to invoice, debit note and credit note	(a) The offences are identified by RMCD or voluntary declared by the Company. (b) Not applicable on fraud or willful evasion (c) Application for remission should be made to the RMCD based on applicable procedures.
2	Federal government and state government are exempted from charging / paying for service tax.
3	Local authorities are exempted from charging / paying service tax for the period from 1 July 2025 to 30 September 2025. Taxable services provided / received starting 1 October 2025 are subject to Service Tax.
4	Non-reviewable contracts are exempted from Service Tax for the period 1 July 2025 to 30 June 2026. Taxable services provided from 1 July 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 June 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 July 2025.
5	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 tax return submitted 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.
6	Group relief	(1) 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) The provision of taxable services for persons that are not within the Group shall not exceed 5% of the total value of taxable services.

Education services

#	Exemptions	Conditions / Details
1	Exemption from penalty, compound and legal action until 31 December 2025 for the following (a) Late registration (b) Late submission of SST return (c) Late payment (d) Incorrect declaration (under reporting / Service Tax underpaid) (e) any mistakes with respect to invoice, debit note and credit note	(a) The offences are identified by RMCD or voluntary declared by the Company. (b) Not applicable on fraud or willful evasion (c) Application for remission should be made to the RMCD based on applicable procedures.
2	Fees exemption for private education institution registered under the Education Act 1996 excluding a special school and a language centre	Exempted fees and charges 1) Charges on books 2) Charges on uniform 3) Charges on food and drinks 4) Charges on transportation 5) Charges on accommodation 6) Deposits that are not part of refundable deposits 7) PIBG fees 8) Fees on trips / study tours in Malaysia / Overseas that is not part of the education fees 9) Fees on student pass or visa
3	Fees exemption for (a) Higher education institution registered under the Universities and University Colleges Act 1971; (b) Private higher education institution registered under the Private Higher Educational Institutions Act 1996; (c) Higher education institution registered under the Education Act 1996 (d) Any language centre registered under the Education Act 1996	Exempted fees and charges 1) Charges on books 2) Charges on accommodation 3) Charges on transportation 4) Charges on food and drinks 5) Deposits that are not part of refundable deposits 6) Fees on trips / study tours in Malaysia / Overseas that is not part of the education fees 7) Fees on student pass or visa

Private healthcare services

#	Exemptions	Conditions
1	Exemption from penalty, compound and legal action until 31 December 2025 for the following (a) Late registration (b) Late submission of SST return (c) Late payment (d) Incorrect declaration (under reporting / Service Tax underpaid) (e) any mistakes with respect to invoice, debit note and credit note	(a) The offences are identified by RMCD or voluntary declared by the Company. (b) Not applicable on fraud or willful evasion (c) Application for remission should be made to the RMCD based on applicable procedures.

Financial services

#	Exemptions	Conditions
1	Service tax exemption for the following categories except for specific categories of services: (a) Any person regulated by the Central Bank of Malaysia; the Securities Commision of Malaysia; or the Labuan Financial Services Authority (b) Any other person providing financial services	The specific categories of services include (a) conventional and islamic banking services i.e. treasury services, credit facility, facility fee for arranging and marking limit (b) Corporate banking advisory services (c) Investment banking services (debt markets) (d) Equity markets (e) Bursa Malaysia services
2	Exemption from penalty, compound and legal action until 31 December 2025 for the following (a) Late registration (b) Late submission of SST return (c) Late payment (d) Incorrect declaration (under reporting / Service Tax underpaid) (e) any mistakes with respect to invoice, debit note and credit note	(a) The offences are identified by RMCD or voluntary declared by the Company. (b) Not applicable on fraud or willful evasion (c) Application for remission should be made to the RMCD based on applicable procedures.
3	Federal government and state government are exempted from charging / paying for service tax.
4	Local authorities are exempted from charging / paying service tax for the period from 1 July 2025 to 30 September 2025. Taxable services provided / received starting 1 October 2025 are subject to Service Tax.
5	Non-reviewable contracts are exempted from Service Tax for the period 1 July 2025 to 30 June 2026. Taxable services provided from 1 July 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 June 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 July 2025.
6	Business to business (B2B) exemption between two financial service providers	(a) Taxable financial services are obtained from another registered provider of financial services. (b) Taxable financial services are obtained for the purposes of providing: (i) taxable financial services (ii) taxable financial services in relation to goods, land or matters outside Malaysia; or (iii) financial services directly related to goods that are exported out of Malaysia.
7	Exemption on imported financial services	(a) Taxable financial services are provided by non-Malaysian financial services provider; and (b) Taxable financial services obtained for the purposes or providing: (i) taxable financial services (ii) taxable financial services in relation to goods, land or matters outside Malaysia; or (iii) financial services directly related to goods that are exported out of Malaysia.
8	Exemption on fees (clearance fee, trading fee, processing fee, perusal fee) with respect to trading of shares listed on Bursa Malaysia
9	Exemption on wakalah fees applicable to transactions / instruments carried out based on Syariah requirements	(a) Taxable services are provided by a registered person. (b) The fees relate to Wakalah principles applied for structuring of products / instruments (c) The fees are not applicable as the main contract (d) The fees are not charged separately by an Islamic Financial Service Provider (e) The products and services are certified as Syariah compliant by relevant bodies and authorities.