Q&A on Rental or Leasing Services in Malaysia
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When will the service tax on rental or leasing take effect?
The service tax on rental or leasing services took effect on 1 July 2025.
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What is the prescribed registration threshold for rental or leasing services?
Businesses providing rental or leasing services are required to register for service tax once their total taxable service exceeds RM1,000,000.
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What is the applicable service tax rate on rental or leasing services?
Taxable rental or leasing services are subject to a service tax rate of 8%.
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Do rental or leasing services involving assets situated outside of Malaysia fall within the scope of service tax?
No. Rental or leasing services involving asset or properties situated outside Malaysia are not subject to service tax.
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ABC Sdn. Bhd, rents a residential unit at RM1,500 per month and a warehouse at RM20,000 per month. How much service tax is chargeable?
Residential property: Exempted and does not attract to service tax.
Warehouse: Subject to service tax.
Service tax payable: RM20,000.00 × 8%
= RM1,600.00
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Are deposits received from tenants for rental services subject to service tax?
Deposits collected strictly for security purposes, and which are refundable are not subject to service tax. However, if any portion of the deposit forms part of the payment for the rental service, it is subject to service tax.
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ABC Holdings Sdn. Bhd. leased a printer to DEF Sdn. Bhd. for RM1,000 per month. The agreement includes a late payment penalty of 10% of the monthly rental. Is the penalty amount taxable?
No. Penalties are not regarded as payment for taxable services and are therefore not subject to service tax.
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FRMN Enterprise, a small printing business with annual revenue of RM450,000, rents a commercial unit from Syarikat EMD Property Sdn. Bhd., a registered service tax person. Is the rental subject to service tax?
Although the rental of commercial property is generally subject to service tax, FRMN Enterprise is exempted from payment under the authority of the Minister of Finance, in accordance with Subsection 34(3) of the Service Tax Act 2018. Tenant is required to register their MSME status via MyPMK at the website of Royal Malaysian Customs Department.
For more details, please visit the official website of the Royal Malaysian Customs Department:
https://mysst.customs.gov.my/
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
KNOWLEDGE
