Latest SST Sales & Service Tax Updates - January 2026

On 5 January 2026, the Malaysian government announced key changes to the Sales and Service Tax (SST) framework.

1. Service tax on rental and leasing services

The government has reduced the service tax rate on rental or leasing services from 8% to 6%, effective 1 January 2026, as part of updated policy measures under the SST framework.
According to the Ministry of Finance, the annual sales threshold for micro, small and medium enterprises (MSMEs) exempted from paying service tax on rental or leasing services has been increased from RM1 million to RM1.5 million.

**Commentary**
This move aims to ease cost pressures on industrial businesses and support MSME growth by reducing compliance burdens and improving cash flow during their initial operating period.

2. Service tax on construction services

The government has extended the service tax exemption on construction contracts signed before 1 July 2025 by one year, now valid until 30 June 2027. Eligible agreements without reviewable clauses can enjoy a total of two years of exemption.
The construction of religious buildings such as suraus, mosques, temples, churches, and shrines remains exempt from service tax, continuing the policy in place since 1 July 2025.
Commentary

This extension offers support for ongoing projects and facilitates continued operations for contractors and developers.

**Commentary**
This extension offers support for ongoing projects and facilitates continued operations for contractors and developers.

Zero-rated sales tax applies to critical raw material and agricultural inputs used by registered manufacturers.
The exemption covers animal feed, fertilisers and pesticides.