KUALA LUMPUR (June 9): The expanded sales and service tax will now kick in on July 1, according to the Ministry of Finance, which will see a sales tax of 5%-10% imposed on selected and non-essential goods.
At the same time, the service tax will be expanded to include new services such as rental or leasing, construction, finance, private healthcare, education and beauty, the ministry said in a statement on Monday (June 9).
"This expansion comes with selected exemptions to avoid double taxation and to ensure that certain essential services for Malaysians are not taxed," it said.
The measures, which were first announced in Budget 2025, are aimed at broadening the country’s tax base and increasing revenue without burdening the wider public, said Finance Minister II Datuk Seri Amir Hamzah Azizan.
“The government is committed to continuing reforms,” he said. “To ensure that the majority of the people are not affected by the revision, the government is taking a targeted approach to ensure that essential goods and services are not taxed.”
The additional revenue, Amir Hamzah said, will enable improvements in public services, particularly the increase in cash assistance to the people, as well as the strengthening of basic infrastructure and the delivery of public services.
Under the revised structure, essential goods such as fresh produce, rice, cooking oil, bread, sugar, medicines and construction materials will remain exempt from the sales tax.
However, certain discretionary or luxury items — such as king crab, imported fruits, truffle mushrooms, essential oils and silk fabrics — will now be imposed with a 5% sales tax, while premium items like racing bicycles and antique paintings will be taxed at 10%.
For services, the expanded scope introduces a tax of 6% to 8% on selected activities:
- Leasing and rental services will be taxed at 8%, with exemptions for residential rentals, reading material, and MSMEs with annual rental revenue below RM500,000.
- Construction services will see a 6% duty applied to providers exceeding RM1.5 million in annual revenue, though residential buildings and public facilities in residential buildings are exempted.
- Financial services based on fees or commissions will be taxed at 8%, but basic banking and Shariah-compliant financing, foreign exchange gains, and capital market services remain exempt.
- Private healthcare services for non-citizens will be levied 6% for operators with annual revenue exceeding RM1.5 million, while Malaysian citizens are fully exempt across all healthcare categories, including traditional and allied health services.
- Private education will be charged a 6% tax on high-end private schools (those charging over RM60,000 per student per year) and non-citizen higher education students. Malaysian citizens are exempt across the board.
- Beauty services, such as facial treatments and hairdressing, will be taxed at 8% if the provider’s taxable value exceeds RM500,000 annually.
To support compliance, the government will not pursue prosecution or impose penalties on companies working to meet registration and reporting requirements by Dec 31, 2025.
Industry players are encouraged to consult the Royal Malaysian Customs Department for registration advice, implementation support and clarification on their tax obligations under the revised tax regime.
Announced by Prime Minister Datuk Seri Anwar Ibrahim during the tabling of Budget 2025 in October last year, the implementation of the proposed tax expansion was initially set for May 1, but the changes were only gazetted on Monday (June 9).
