Malaysia: Amendments to service tax policies
Amendments related to expansion in scope of service tax
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October 21, 2025
The Royal Malaysian Customs Department issued the following amendments (dated October 17, 2025) to service tax policies, related to the expansion in the scope of service tax.
Service Tax Policy No. 1/2025 (Amendment No. 3) – Financial services
- Exemption from payment of service tax on management services for fixed price funds under Amanah Saham Nasional Berhad (ASNB) [previously was Permodalan Nasional Berhad (PNB)].
- Exemption from payment of service tax on the acquisition of re-insurance services or re-takaful services by insurance companies or takaful companies [new].
Service Tax Policy No. 2/2025 (Amendment No. 2) – Rental or leasing services
- Group relief—updated to cover companies within a group that receive rental or leasing services from any other company within the same group, whether inside or outside Malaysia.
- Business-to-business (B2B) exemption facility on rental or leasing services for the period from July 1, 2025, to August 31, 2025, is granted to rental or leasing service providers who newly reached the registration threshold in July 2025 and have applied for service tax registration on/ before August 31, 2025 [new].
Service Tax Policy No. 3/2025 (Amendment No. 1) – Construction works services
- Non-reviewable contracts—one of the conditions to qualify has been amended to “The contract* is made in writing, signed before July 1, 2025, and duly stamped with stamp duty by the Inland Revenue Board of Malaysia (LHDN) before December 31, 2025.”
* including any variation order/ extension of time
- Service tax exemption on the construction of residential buildings and public facilities related to residential buildings within a mixed development project [new].
- B2B exemption facility on consultancy services under a design and build construction contract [new].
- B2B exemption facility on construction work for the period from July 1, 2025, to August 31, 2025, is granted to construction work service providers who newly reached the registration threshold in July 2025 and have applied for service tax registration on or before August 31, 2025 [new].
Service Tax Policy No. 4/2025 (Amendment No. 2) – Education services
- Children and dependents of foreign diplomats are exempted from paying service tax on educational services [new].
- Education fees or service charges that are fully sponsored by educational institutions, higher learning institutions, companies, foundations, or other organizations are exempted from service tax [new].
Read an October 2025 report prepared by the KPMG member firm in Malaysia