SST in Malaysia for SMEs: Sales Tax, Service Tax and Who Must Register
SST in Malaysia is two separate taxes. Sales tax is charged once on goods, by registered manufacturers or at import, while service tax is charged on a list of services by registered providers, mostly at 8%. An SME has to register only when it crosses a threshold, which for most businesses means more than RM500,000 of taxable sales or services over 12 months.
The rules widened on 1 July 2025, when service tax reached rental, construction, financial, private healthcare and private education services. Budget 2027, tabled on 9 October 2026, proposed further changes, including a lower service tax rate for elderly care from 1 January 2027. This guide explains the rules as the Ministry of Finance (MOF) and the Royal Malaysian Customs Department (RMCD), which runs SST, published them; it is not tax advice, and a registered tax agent or Customs should confirm your own position.
The basics: two taxes under one name
Customs describes sales tax as a single-stage tax on imported and locally manufactured goods, charged either at importation or when the manufacturer sells or otherwise disposes of the goods. Service tax is charged on taxable services provided in Malaysia by a taxable person in the course of business, and also on imported taxable services, according to the MySST overview.
The practical difference for an SME is where you sit in the chain. A factory above the threshold registers and charges sales tax on what it makes; a shop that buys finished goods and resells them is not a manufacturer, so any sales tax is already inside its purchase price. A consultancy, restaurant or landlord, on the other hand, may have to charge service tax on its own invoices once it crosses the threshold.
| Sales tax | Service tax | |
|---|---|---|
| What is taxed | Taxable goods manufactured in Malaysia, and imported goods | Services listed as taxable, provided in Malaysia by a taxable person; imported taxable services |
| Who charges it | Registered manufacturers; Customs at import | Registered service providers |
| Main rates | 5% or 10%; essential goods at 0% or exempt | 8% from 1 March 2024; 6% for food and beverage, parking, logistics and telecommunications; 6% for construction, private education, private healthcare for non-citizens and, from 1 January 2026, rental |
| Registration threshold | Taxable sales above RM500,000 in 12 months (sub-contract work above RM500,000) | Mostly above RM500,000 in 12 months; RM1.5 million for food and beverage, construction and private healthcare; above RM1 million for rental and fee-based financial services; no threshold for credit and charge cards |
| Taxable period | Two months | Two months |
| Return | SST-02, by the last day of the month after the period ends | SST-02, by the last day of the month after the period ends |
Sources for the table: MySST pages on registering a business and the 2025 service tax expansion, the MOF announcement of 9 June 2025, Customs’ rental guide of May 2026 and its guide on returns and payment.
Sales tax: who registers and what it costs
The RM500,000 test for manufacturers
A manufacturer of taxable goods must register once the sales value of those goods exceeds RM500,000 over 12 months. The same threshold applies to a sub-contract manufacturer, measured on the value of the work it performs.
Customs counts the 12 months two ways, and you must check both. Under the historical method you add the month plus the 11 before it; under the future method you add the month plus the 11 after it, so a large order you already know is coming can push you over the line before the sales arrive.
Some activities are exempt from registration even though they look like manufacturing. Customs gives tailoring, installing goods into buildings, and the work of jewellers and opticians as examples, and a manufacturer of non-taxable goods neither registers nor can register voluntarily.
Rates after the July 2025 revision
Under the revision that took effect on 1 July 2025, daily essentials stayed free of sales tax, including chicken, fish, vegetables, local fruits, rice, flour, cooking oil, medicine and books, along with basic construction materials such as cement and sand, the MOF announcement said. Some discretionary goods that had been untaxed, such as king crab, salmon, imported fruits, essential oils and industrial machinery, moved to 5%. A few premium items, such as racing bicycles and antique hand-painted artworks, went to 10%.
In a clarification of 11 June 2025, the MOF said that fruit grown in Malaysia is agricultural produce, not a manufactured good, so it is not subject to sales tax, while imported fruit is. On 27 June, before the revision took effect, it also exempted imported apples, oranges, mandarins and dates.
Both statements are a useful reminder that the rate depends on what the item is and where it came from, not on how a supplier describes it. If you manufacture or import, check your products’ HS codes against the rate orders on MySST rather than relying on a category name.
Service tax: the services, the rates and the thresholds
Service tax applies only to services listed as taxable in the First Schedule of the Service Tax Regulations 2018, grouped by type. If your service is not on the list, you do not charge service tax on it, however large your turnover.
The 8% rate and the 6% exceptions
The general rate rose to 8% on 1 March 2024. Before that it was 6%, and food and beverage, parking, logistics and telecommunications stayed at that lower rate.
Credit and charge cards work differently. Instead of a percentage, they carry a fixed RM25 a year for each principal or supplementary card issued.
Which services, and at what turnover
Most groups register above RM500,000 of taxable services in 12 months. That covers, among others, hotels and other accommodation, private clubs, parking operators, car repair centres, advertising, cleaning, courier and logistics firms, according to the MySST registration page. Restaurants, cafes, caterers and food court operators register only above RM1.5 million.
Group G covers professional and business services. It includes lawyers, accountants, surveyors and estate agents, engineers, architects, consultants, management services, employment agencies, security guard agencies, IT services, online platforms and maintenance and repair, each with the RM500,000 threshold. Customs notes that several of these services are excluded when they relate to goods or land outside Malaysia, or to a subject matter in another country.
Services you buy from abroad
Service tax also reaches imported taxable services. It becomes due when you pay for the service or receive the invoice, whichever is earlier, according to the MySST overview. A business that is not registered but acquires such a service declares it on Form SST-02A, by the last day of the month after it pays or receives the invoice, under Customs’ return and payment guide.
What the July 2025 expansion added
The MOF’s announcement of 9 June 2025 named six new categories of taxable services: rental or leasing, construction, financial services, private healthcare, private education and beauty. On 27 June, before the 1 July start, it dropped beauty services such as manicures, pedicures, facials and hairdressing, and raised the registration threshold for rental and financial services from RM500,000 to RM1 million, put into effect by the amending regulations P.U. (A) 201/2025. The five categories that went ahead carry exemptions meant to avoid tax being charged on tax between businesses and to keep certain essential services for Malaysian citizens untaxed, and the table shows them as Customs set them out in its later guides and policies.
| New taxable service | Rate | Registration threshold (12 months) | Scope notes |
|---|---|---|---|
| Rental or leasing | 8% from 1 July 2025; 6% from 1 January 2026 | Above RM1 million (raised from RM500,000 before the 1 July 2025 start) | Not taxed: residential property, reading materials, financial leases, assets outside Malaysia; qualifying MSME tenants exempt; group relief |
| Construction work | 6% | Above RM1.5 million | Not taxed: residential buildings and the public facilities related to them |
| Financial services | 8% on fee- or commission-based services | Above RM1 million | Not taxed: basic banking, interest- or profit-based financing and other listed items |
| Private healthcare | 6%, for non-citizens only | RM1.5 million | Malaysian citizens exempt, including traditional and complementary medicine and allied health |
| Private education | 6% | A fee test instead: private preschools, primary and secondary schools charging more than RM60,000 a year per student | Higher education taxed only when provided to non-citizens |
Sources for the table: the MOF announcements of 9 June 2025 and 27 June 2025, the MySST expansion FAQ, Customs’ financial services guide of October 2025, its construction guide of March 2026 and its rental guide of May 2026.
The MOF gave businesses time to adjust. It said that firms taking steps to comply would face no prosecution or penalties until 31 December 2025, so from 1 January 2026 that protection no longer applies.
Renting premises: the MSME tenant exemption
For an SME that rents an office, shop or warehouse, the part of the expansion most likely to show up first is on the rent invoice. A landlord whose commercial rental income crosses the threshold charges service tax on the rent, and the rate started at 8%. It has been 6% since 1 January 2026, under an amendment order gazetted in March.
A tenant with MSME status can be exempt from paying it, but only if it registers. Customs’ Service Tax Policy No. 2/2025, in its fifth amendment dated 22 July 2026, sets the conditions summarised below.
| Condition | What the policy requires |
|---|---|
| Registration | Register and declare MSME status in MyPMK, the Customs system for this exemption |
| Sales test | Annual sales declared to LHDN for the most recent year of assessment: below RM1 million, exempt from 1 July 2025; above RM1 million and below RM1.5 million, exempt from 1 January 2026 |
| Size and ownership | Paid-up ordinary share capital not above RM2.5 million; if set up by a company in the same group, that company’s shareholding not above 20% |
| Deadline | MSMEs registered on MyPMK by 31 December 2026 can claim the exemption from 1 July 2025 or 1 January 2026, depending on their sales band |
| Renewal | Update the annual sales figure in MyPMK every year, by the end of the month after the income tax return is filed |
| New businesses | From 1 January 2026, a newly established MSME is exempt for one year from its SSM registration date (or the Sabah or Sarawak equivalent), on the same capital and ownership conditions |
The tenant is responsible for what it declares. If the declaration turns out to be false, Customs can recover the service tax that should have been paid, so keep the LHDN figures you rely on.
Owners of commercial units also got relief. Under Service Tax Policy No. 3/2026, maintenance charges and sinking fund contributions that a joint management body or management corporation collects for non-residential premises are exempt from service tax from 1 July 2026, until the regulations are amended. Service tax on those charges for periods up to 30 June 2026 still had to be paid.
Registering, charging and filing
When you become liable
You become liable to register at the earlier of the two 12-month tests, historical or future, and registration is done online through MySST. Businesses below the threshold can generally apply to register voluntarily, subject to conditions set by Customs.
The MOF gave a worked example for the newly taxable services. A company that first reached the rental threshold in July 2025 had to register by the end of August and start charging service tax from 1 September 2025, so that company had about a month after crossing the line to register. Confirm the deadline for your own case with Customs rather than assuming it.
Returns and payment
A registered person files the SST-02 return for each taxable period, normally two months, and pays by the last day of the month after the period ends. Customs can approve a different taxable period on written application, according to its guide on returns and payment.
Service tax falls due when payment is received from your customer, so the tax you collect can sit in your account for weeks before it goes to Customs. Treat it as Customs’ money from the day it arrives; our guide to cash flow management for Malaysian SMEs applies the same habit to wage deductions and shows how to plan around fixed payment dates. If you are also preparing for e-invoicing, our e-invoicing guide explains the LHDN side of the paperwork.
What Budget 2027 announced for SST
Budget 2027 was tabled in the Dewan Rakyat on 9 October 2026, and its SST measures were targeted rather than sweeping. These are proposals as announced in the budget speech; each takes effect through the legislation and Customs orders that follow, so watch MySST for the implementing documents.
- Elderly care. Service tax on elderly care services is to be cut from 8% to 6%. The cut is to apply from 1 January 2027, and care with annual fees of up to RM96,000 is to be exempt.
- Sales tax refunds for manufacturers’ inputs. Manufacturers will be able to reclaim sales tax on machinery, spare parts and equipment bought from local traders or distributors. The facility also covers raw materials used to make pharmaceuticals, animal feed, fertilisers and pesticides.
- Langkawi and Labuan. The duty-free purchase limit for visitors to the two islands is to rise to RM10,000, with a minimum stay of 48 hours.
The speech did not announce a return of the goods and services tax or any change to the general sales tax and service tax rates. For most SMEs, the rules in force on 1 July 2025 and the rental changes of January 2026 remain the ones to work with.
What to do next
- List what you sell. For each product or service, note whether it is a manufactured good, an imported good or a listed taxable service, and which group it falls in.
- Run both 12-month tests. Add up the last 12 months and the next 12 months of taxable sales or services, including confirmed orders, against your threshold.
- Check your rent. If you rent commercial premises and qualify as an MSME, register on MyPMK by 31 December 2026, then check that your rent invoices reflect the exemption.
- Read your landlord’s and suppliers’ invoices. Rental service tax should be at 6% from January 2026, and a supplier charging you service tax should be registered.
- Separate the tax from your cash. Move collected SST into its own account so the two-monthly payment never competes with payroll.
- Get confirmation for grey areas. Ask Customs through its MySST channels, or have a registered tax agent review your position before you register or decide not to.
FAQ
Do I have to charge SST if my business is below the threshold?
No. SST is charged by registered manufacturers and service providers. You become liable to register once your taxable sales or services pass the threshold for your category under either 12-month test, and voluntary registration is possible in many cases.
My landlord still charges 8% service tax on rent. Is that right?
Not for rent from 1 January 2026, when the rate on rental and leasing became 6%. Customs set out a refund route for landlords who overpaid, and if your business qualifies as an MSME tenant you may not owe the tax at all.
I only buy and resell goods. Do I register for sales tax?
Sales tax registration is for manufacturers of taxable goods. Sales tax on goods you import is charged by Customs at importation, according to the MySST overview, and if you also export, our guide to exporting from Malaysia covers the customs side.
Is my consultancy fee to an overseas client subject to service tax?
It may not be. Customs excludes several professional services from tax when they are provided in connection with goods or land outside Malaysia, or where the subject matter relates to another country, according to the MySST registration page. The details depend on the service, so check the relevant guide or ask Customs.
Did Budget 2027 change my SST rate?
Only if you provide elderly care services, where the speech proposed a cut to 6% from 1 January 2027. Other businesses keep the rates and thresholds described in this guide.
