Malaysia exempts TIA-i fees from service tax and ends the non-reviewable contract relief

What changed in detail

Service Tax Policy No. 1/2025 (Amendment No. 5), dated 1 July 2026, amends the exemption schedule for financial services in Group H of the First Schedule to the Service Tax Regulations 2018.

A new item 14 exempts service tax on fees or commissions charged on the operation of a Transactional Investment Account-i (TIA-i), with effect from 1 June 2026. The exemption is conditional: the provider must be a registered person, the account must comply with shariah principles under the Islamic Financial Services Act 2013, it must function as a savings or current account with no lock-in period, and the fees must relate to ordinary operation — cash deposits and withdrawals, payments and transfers, debit card issuance, counter and ATM transactions, and statement printing. No refund is available for service tax paid on those fees between 1 July 2025 and 31 May 2026.

The same document ends the non-reviewable contract relief. Item 4 exempts such contracts for the period 1 July 2025 to 30 June 2026 only, and states that services provided on or after 1 July 2026 are subject to service tax.

What it means

Two changes in opposite directions in one document, and the second is the one that costs money. Financial-services providers that priced long-term non-reviewable contracts on the assumption the exemption would roll forward now have to charge tax on a contract whose value, by definition, cannot be adjusted — the tax comes out of margin unless the contract is reopened.

The TIA-i exemption is narrower than “investment account fees”. Every condition is cumulative, and the no-refund rule for the 2025–26 period means there is nothing to reclaim for the past: the only work is to stop charging from 1 June 2026 onwards.