Malaysia Revises SST Scope, Adding New Taxable Items and Service Sectors
Starting 1 July 2025, Malaysia will expand its Sales and Services Tax (SST) regime as part of a broader fiscal reform. The changes significantly widen the SST scope, with new goods and services coming under tax, particularly in high-spending sectors.
Sales Tax Changes
The Finance Ministry estimates an additional RM3 billion in annual revenue, mainly from luxury goods and high-volume services. Transitional rules apply, so if goods are invoiced before 1 July but delivered after, the old rates may still be valid. Accurate invoicing is crucial.
Wider Scope for SST in Services
The most significant shift is the expanded scope of SST in services. Over 30 new categories are now subject to tax. Some of these include logistics and freight forwarding, warehousing, brokerage, and financial advisory services. It also encompasses industries such as private education, beauty and wellness, private healthcare (for non-Malaysians), consulting and software services, and commercial leasing.
Most services remain at a 6% rate, but some (like brokerage and beauty) will be taxed at 8%. Imported taxable services, including foreign digital and consulting services, fall within the scope of SST.
Grace Period and Enforcement
A grace period is in effect until December 31, 2025. Businesses that show genuine efforts to comply will not face penalties for late registration or filing errors. After that, enforcement resumes with potential back taxes and fines.
Who’s Affected
Industries previously outside the tax net must now adapt. These include logistics, education, wellness, and professional services. The SST scope now touches pricing strategies, contracts, and internal billing. This is especially for foreign firms with Malaysian operations.
Financial service providers will also feel the impact, particularly those offering fee-based or bundled services. SST may now be applied where it was previously not. To prepare, businesses need to review operations to assess SST exposure, update invoicing systems and ERP software, revisit long-term contracts that span the change, ensure registration if above the threshold and communicate price changes to clients and suppliers.
Need help navigating the expanded scope for SST?
3E Accounting provides comprehensive support, encompassing SST registration and compliance, system updates, and client communication. Let our experts guide your business through Malaysia’s changing tax landscape.
