A Broader Tax Base for a Stronger Economy
Effective 1 July 2025, Malaysia is implementing significant amendments to its Service Tax framework. These changes, introduced through a series of updated Orders and Regulations, aim to strengthen the nation's fiscal position by expanding the scope of taxable services and refining tax rates. This infographic breaks down the key changes, helping businesses and consumers understand the new landscape, from rate adjustments to the inclusion of entirely new sectors like private healthcare, construction, and specific educational services.
Service Tax Rates at a Glance
Standard Rate
8%
Applies to most taxable services, maintaining the rate set on March 1, 2024.
Specific Services Rate
6%
A targeted rate for essential services and newly scoped sectors.
Credit/Charge Cards
RM25
A fixed annual rate per card, now including Syariah-compliant financing.
Spotlight on the 6% Rate: Who's Included?
The 6% service tax rate has been expanded to cover several new and existing categories. This strategic move aims to apply a lower tax rate to essential services and sectors being brought into the tax net for the first time, mitigating the financial impact on consumers and businesses in these key areas.
Food & Beverages
Prepared food and beverage services
Telecommunications
Telecommunication services
Parking Services
Parking space services
Logistics
Logistic services
Healthcare
Private healthcare services
Traditional Medicine
Traditional & complementary medicine
Allied Health
Allied health services
Construction
Construction works services
Education
Private education services
Widening the Net: New Taxable Service Groups
The most significant change is the expansion of the service tax to cover new industries. The following table details the new and expanded groups, their taxable services, and the annual turnover thresholds for registration. This expansion targets high-value sectors while providing clear financial benchmarks for compliance.
| New/Expanded Group | Description of Services Taxed | Key Threshold (Annual Turnover) |
|---|---|---|
| Group H: Financial Services | Fee/Commission-based services, Insurance/Takaful (non-life/medical), Credit Card activation (Nil threshold). Excludes interest, basic banking. | RM500,000 |
| Group I: Healthcare-Related | Operation of Private Healthcare Facilities, Traditional & Complementary Medicine, and Allied Health Services. | RM1,500,000 |
| Group K: Rental or Leasing | Rental of tangible assets. Excludes housing (incl. SOHO, serviced apts), reading materials, assets outside MY, financial leases. | RM500,000 |
| Group L: Construction Works | All construction works services. Excludes residential buildings and related public facilities (unless in a mixed development). | RM1,500,000 |
| Group M: Education | Private education (pre-school to post-secondary) with fees > RM60k/student/year. Higher education & language centres for non-citizens. | Nil |
Balancing the Impact: Key Exemptions
To ensure fairness and prevent cascading taxes, the government has introduced targeted exemptions. These are designed to protect citizens accessing essential services, support specific business-to-business transactions, and provide relief for persons with disabilities.
Malaysian Citizens (Healthcare)
Full exemption from service tax on private healthcare, traditional & complementary medicine, and allied health services. This ensures healthcare accessibility is not impacted for citizens.
Business-to-Business (B2B)
Providers of Rental/Leasing (Group K) and Construction (Group L) services are exempt when the service is for subleasing or is the same service they provide, preventing double taxation within the supply chain.
OKU Card Holders (Education)
Malaysian citizens holding a valid Kad OKU are exempt from service tax on specified private education services, ensuring continued access to education.
LFSA Regulated Persons
Persons regulated by the Labuan Financial Services Authority are exempt from service tax on financial services acquired for their regulated activities.