The Sales and Service Tax (SST) is Malaysia’s single-stage consumption tax applied to the sale of manufactured or imported goods (Sales Tax) and the provision of specific taxable services (Service Tax).
SST is borne by consumers, while businesses act as collection agents for the Royal Malaysian Customs Department (RMCD). For foreign-owned companies operating in Malaysia, misunderstanding SST obligations may lead to backdated tax assessments, penalties, and audit exposure.
This guide explains the latest SST framework in 2025, including the 8% Service Tax update, registration thresholds, and how SST applies by industry, with a focus on foreign business activities.
1. Key Components of SST
1.1 Sales Tax
Scope:
Levied on taxable goods that are:
- Imported into Malaysia, or
- Manufactured locally and sold, used, or disposed of by a registered manufacturer
Rates:
- 5% or 10%, depending on the category of goods
Exemptions:
Essential goods such as basic food items (rice, vegetables, chicken, fish, etc.) are generally exempt.
1.2 Service Tax (Latest Update)
Scope:
Charged on specific taxable services provided in Malaysia by a registered person in the course of business.
Rates (2025):
- 8% – for most taxable services
- 6% – for selected essential services, including:
- Food & Beverage (F&B)
- Telecommunications
- Parking space provision
- Logistics and freight-related services
- RM 25 per year for credit card and charge card services
2. SST Registration Thresholds
Service Tax Registration
- RM 500,000 annual taxable turnover (for most taxable services)
Once this threshold is exceeded, registration is mandatory, regardless of:
- Foreign or local ownership
- Whether clients are Malaysian or overseas
- Whether payments are received offshore
Sales Tax Registration
- Applies primarily to manufacturers of taxable goods
- Importers are subject to Sales Tax at the point of import
- No general turnover threshold applies to importers
3. SST by Industry – Impact on Foreign-Owned Companies
A. Consulting & Professional Services
Includes:
- Business & management consulting
- Education consulting
- Marketing & digital services
- Advisory services
SST status:
Subject to 8% Service Tax once RM 500,000 threshold is exceeded
Common mistake:
Assuming overseas clients are exempt — SST still applies if services are rendered from Malaysia.
B. IT, Software & Digital Businesses
| Activity | SST Status |
| Custom software development | Usually not taxable |
| SaaS / subscription platforms | Often taxable (8%) |
| IT consulting & system integration | Taxable (8%) |
| Digital marketing services | Taxable (8%) |
* MDEC registration does not automatically exempt companies from SST.
C. Trading, Import & Export
- Sales Tax applies to imported or manufactured taxable goods
- Charged at import or manufacturing stage
- Applies even if goods are sold to overseas customers
D. Logistics & Freight Forwarding
Many logistics services are subject to 6% Service Tax, including:
- Freight forwarding
- Warehousing
- Handling and agency fees
This sector is a key audit focus for RMCD.
E. Education & Training
- Licensed education institutions → often exempt
- Corporate training, short courses, online training → often taxable (8%)
Correct classification is essential.
F. Property & Real Estate
- Commercial property leasing → may be taxable
- Property management services → taxable (8%)
- Passive investment holding → usually not taxable
4. SST Enforcement Focus (2024–2025)
RMCD has intensified enforcement on:
- Non-registered companies exceeding thresholds
- Incorrect service classification
- Digital and cross-border services
- Foreign-owned companies assuming exemptions
Risks include:
- Backdated SST
- Penalties and compound fines
- Increased audit exposure
Conclusion
With the Service Tax now at 8%, SST compliance has become more critical for foreign-owned companies operating in Malaysia. SST is activity-based, industry-specific, and strictly enforced.
Early SST planning helps businesses:
- Price services correctly
- Avoid unexpected tax liabilities
- Maintain clean compliance records
Horizon Hub Consulting assists foreign-owned companies with SST assessment, registration, classification, and ongoing compliance.
Email us: info@horizonhub-mygmail-com
Text us on WhatsApp: +60 11-3773 0699