Malaysia confirms 6% service tax on rental and leasing from 1 January 2026

What changed in detail

Service Tax Policy No. 2/2025 (Amendment No. 5), dated 22 July 2026, revokes and replaces Service Tax Policy No. 2/2025 and its first four amendments, and restates the whole exemption schedule for rental or leasing services in Group K of the First Schedule to the Service Tax Regulations 2018.

The operative change is at item 8. The interim 2% exemption on the service tax rate for rental or leasing is revoked following the gazetting of P.U.(A) 125, the Service Tax (Rate of Tax) (Amendment) Order 2026, on 13 March 2026. The rate on rental or leasing services is therefore 6% with effect from 1 January 2026. Appendix B sets out the refund route for providers who over-collected in the interim: a claim under section 38(1)(b) of the Service Tax Act 2018, supported by the SST listing, the rental agreement, the invoice and proof that the tax was refunded to the tenant.

A new item 9 exempts newly established MSME tenants from service tax on rental or leasing for one year from their SSM registration date, effective 1 January 2026, subject to paid-up capital of no more than RM2.5 million and MyPMK declaration.

What it means

This is the expensive one of the July batch. Anyone who charged 2% during the interim period has a reconciliation to do, and the refund route runs through the tenant — the claim is only allowed once the over-collected tax has actually been returned to the service recipient, so this is a cash and contract exercise, not a filing adjustment.

The one-year MSME exemption is easy to miss because it sits in the same document as the rate confirmation. It is claimed by the tenant through MyPMK, not applied by the landlord on assumption, so lessors should ask for the declaration rather than infer eligibility.