(SST Expansion 2025) 6 New Taxable Services ~ Who Pays, Who's Exempt?

Brace yourselves, Malaysia – your service tax landscape is shifting dramatically on July 1, 2025. The Government's expanded Sales and Service Tax (SST) isn't just a tweak; it's a massive overhaul targeting 6 new service sectors.

Leasing that equipment?

Building that project?

Paying for premium private school or a spa day?

Get ready 👀

The long-anticipated expanded SST is finally here, bringing services like leasing, construction, finance, private healthcare, education, and beauty under the tax net. 

Designed with precision, these changes aim to boost national revenue while shielding everyday Malaysians and SMEs – but businesses in these sectors must act fast.

Stay tuned: we break down exactly who pays, who’s exempt, and the crucial thresholds you need to know.

Here is a summary of the 6 new categories of services subject to the expanded Service Tax (SST) effective 1 July 2025:

1. Leasing or Rental Services
   👉 Tax Rate: 8%
   👉 Threshold: RM500,000 in total leasing/rental income over 12 months.
   
   
   Exemptions/Special Treatment:
   💖Residential buildings, reading materials, overseas tangible assets, overseas financial leases.
   💖Lessees classified as Micro, Small & Medium Enterprises (MSME) with annual sales < RM500,000.
   💖 Business-to-business (B2B) transactions exempt to avoid double taxation.
   12-month exemption for non-reviewable contracts from the effective date.
   
   

   Update on 27 June 2025:

   💫Threshold of SST registration increased to RM1mil (from RM500k).
   
   
2. Construction Work Services
   👉 Tax Rate: 6%
   👉 Threshold: RM1.5 million for the service provider.
   
   
   Exemptions/Special Treatment:
   💖 Construction of residential buildings and related public facilities is exempt.
   💖 Business-to-business (B2B) transactions exempt to avoid double taxation.
   💖 12-month exemption for non-reviewable contracts from the effective date.
   💖Higher threshold (RM1.5mil) eases compliance for small/medium contractors.
   
   
3. Financial Services
   👉 Tax Rate: 8% (on fee/commission-based services)
   
   
   Exemptions/Special Treatment:
   💖Basic financial services for citizens remain exempt: Basic banking, interest/profit-based payments under Shariah financing.
   💖 Other exempt services: FX gains, capital market fees, punitive charges, outbound remittances, services directly linked to exported goods, charges to overseas remittance agents, inbound remittance brokerage/guarantee services, life/medical/family takaful brokerage/guarantee for individuals.
   💖 Business-to-business (B2B) transactions exempt to avoid double taxation.
   💖Syariah-compliant fees and services for Bursa Malaysia & Labuan are exempt.
   
   

   Update on 27 June 2025:

   💫Threshold of SST registration increased to RM1mil (from RM500k).
   
   
4. Private Healthcare Services
   👉 Tax Rate: 6% (for non-citizens only)
   👉 Threshold: RM1.5 million for the service provider.
   
   
   Exemptions/Special Treatment:
   💖Malaysian citizens are fully exempt for private healthcare, traditional/complementary medicine (Malay, Chinese, Indian, Islamic, Homeopathy, Chiropractic, Osteopathy) and allied health services (e.g., physiotherapy, audiology, speech therapy).
   💖 Non-citizens pay 6% (lower than the standard service tax rate).
   💖 Higher threshold (RM1.5mil) eases compliance for small/medium clinics.
   
   
5. Education Services
   👉 Tax Rate: 6%
   👉 Applies to private preschools, primary & secondary schools with annual fees exceeding RM60,000 per student.
   👉 Applies to higher education fees for non-citizen students.
   
   Exemptions:
   💖 Higher education fees for Malaysian citizen students.
   💖 Education services for Malaysian citizens with disabilities (OKU).
   
   💁 Government views this as targeted at high-value private education for the more affluent.
   
   
6. Beauty Services (Update on 27 June 2025: Exempted)
   👉 Tax Rate: 8%
   👉 Threshold: RM500,000 in taxable service value over 12 months.
   👉 Scope: Includes services like facial treatments and hair styling/salons.

Key Overall Points from the Summary:

• Targeted Approach: The expansion is designed to tax discretionary/non-essential services (premium goods, high-value education/beauty) and services used significantly by non-citizens or businesses, while shielding basic necessities and the majority of citizens.
  
  
• Thresholds: Most new service categories have registration thresholds (RM500k or RM1.5m), protecting smaller businesses.
  
  
• B2B Relief: Exemptions for B2B transactions are common to prevent double taxation.
  
  
• Transition: Non-reviewable contracts get a 12-month grace period. No prosecution/penalties for compliance efforts until 31 Dec 2025.
  
  
• Citizen Protection: Significant exemptions exist for Malaysian citizens, especially in healthcare, education, and basic financial services.

This targeted expansion shields everyday necessities and protects Malaysian citizens from direct cost increases.

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