Stepping into 2025 means a new year, but unfortunately, it also comes with new costs. Malaysia’s Sales and Service Tax (SST) rate has moved from 6% to 8% compared to the previous year, and beginning 1 July 2025, the SST will expand to include several real-estate sectors.
According to Prime Minister Datuk Seri Anwar Ibrahim, the SST increase is part of taxation reform measures to grow the country’s revenue and benefit citizens. Malaysia’s collectable tax rate is one of the lowest in ASEAN, falling behind countries like Singapore and Thailand.
What Is SST?
Malaysia’s Sales and Service Tax, more commonly known as SST, was introduced in 2018 to replace the Goods and Service Tax (GST).
The SST is taxed on selected goods and services and primarily affects manufacturers, importers, and end consumers. Previously, in 2018, SST rates comprised 6% Service Tax and 10% Sales Tax respectively. But did you know that the SST is not a new tax measure?
In fact, the SST has been around since 1970 and used to consist of two separate tax laws: the Sales Tax Act 1972 and the Service Tax Act 1975. Therefore, the 2018 version of the SST feels more like a comeback and not a new tax to stress about.
Read also: Quick Guide for Property Taxes
What Industries Are Affected By The SST Rate Increase In 2024?
Effective 1 July 2025, SST will be expanded to property-related services such as construction services and commercial rentals.
There are no changes to the existing 8% Service Tax rate for all taxable services. However, essentials such as food and beverages, telecommunications, logistics, vehicle parking space services, and credit and charge card services are exempted.
Besides that, the Service Tax will also cover karaoke centres, brokerage services, and underwriting services.
Will The Property Industry Be Affected By SST?
Yes, the property industry will be impacted by SST, but majorly for certain services and property types only.
Beginning 1 July 2025, a 6% service tax will be applied to construction services. However, this tax rate will only be applied if the construction company’s taxable service value is more than RM1.5 million yearly.
Additionally, the tax is exempted for construction work specifically for residential developments and public facilities related to them. This means if a developer building residential homes has a taxable service value of less than RM1.5 million annually, they are exempted from this service tax.
In the rental space, an 8% service tax will be imposed on leasing and rental services for commercial rentals. This applies to landlords – or companies providing the rental service – earning a total rental income of more than RM500,000 in 12 months.
This tax impacts the lease of commercial properties (office buildings, shops, warehouses) and commercial items like vehicles, machinery, or other tangible business goods. So if you’re renting a warehouse and heavy machinery, both will incur 8% tax.
What about residential rentals, like if you want to rent a house in Malaysia? Fortunately, residential properties including SOHO units are exempted from this tax.
Other rental/leasing exemptions include if your business is classified as a micro, small, or medium enterprise (MSME) earning less than RM500,000 sales annually; for Business-To-Business (B2B) services; and non-reviewable contracts with a 12-month exemption period.
Basic building materials like cement, sand, bricks, and certain steel products maintain a 0% sales tax. Despite this, property prices may still be affected by factors like demand and supply, profit margins, exchange rates, overhead costs, and others.
Moreover, the services provided during the purchase or sale of a property may also be chargeable. These can include commissions, travel expenses, the cost of additional work, and more.
For property agents, an 8% SST rate on commission is required if they are under registered agencies with an annual turnover of at least RM500,000. Hence, if property agents manage to close a transaction, they can ask the seller or buyer to bear the SST charge instead.
How Do I Pay SST?
According to the Royal Malaysian Customs Department, SST payments can be made electronically using FPX, cheques, or bank drafts. Be sure to make your payments on time because late payments or failure to register can result in a penalty.
The late payment penalty for SST includes:
- A penalty of 10% of the unpaid amount after the last date within the first 30-day period.
- A penalty of 15% of the unpaid amount after the last date within the second 30-day period.
- A penalty of 15% of the unpaid amount after the last date within the third 30-day period.
Can The SST Save Malaysia’s Economy?
According to insight by EY, the 2% hike in SST is supposed to generate at least RM3 billion of extra revenue in 2024. Despite that, it is met with scepticism as it comes amidst global economic uncertainty, high inflation rates, and a greater cost of living.
Although time will tell if the new SST rate will propel Malaysia’s economy forward, there has never been a better time to spend wisely and evaluate purchasing decisions thoroughly.
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