KUALA LUMPUR (Jan 5): The government has extended the service tax exemption on construction contracts signed before July 1, 2025 by one year, now valid until June 30, 2027. Eligible agreements without reviewable clauses can enjoy a total of two years of exemption.
The Ministry of Finance (MOF) in a statement on Monday announced the new decisions by Prime Minister Datuk Seri Anwar Ibrahim on the sales and service tax policy.
It said construction of religious buildings such as suraus, mosques, temples, churches, and shrines remains exempt from service tax. It has been exempt since July 1, 2025.
The announcement came on top of tax measures effective Jan 1, 2026 to support businesses and control costs for consumers announced by Anwar during his New Year message earlier on Monday.
These include:
- Service tax on rental services:
- Rate reduced to 6% from 8%
- Exemption threshold for small and medium enterprises (SMEs) raised from RM1 million to RM1.5 million
- Newly established SMEs exempt from service tax on rental for one year, starting from registration
- Zero-rated sales tax applies to critical inputs used by registered manufacturers in animal feed, fertiliser, and pesticides, aiming to stabilise prices of essential goods.