The Backstory: SST in Malaysia
Malaysia introduced the Goods and Services Tax (GST) in 2015, but it was abolished in 2018 following public discontent and replaced with the Sales and Service Tax (SST). While SST was simpler, it had a narrower scope and contributed less to national revenue.
In Budget 2024 and 2025, to address fiscal deficits, the government proposed a significant expansion of SST. This will take full effect on 1 July 2025, and includes both a broader scope of taxable services and increased tax rates for certain service categories.
What Changes on 1 July 2025?
â–£ Sales Tax Expansion
- Newly Taxed Goods: Non-essential or luxury goods like king crab, salmon, imported cheese, abalone, and designer fabrics are now subject to 5%–10% Sales Tax.
- Essential Goods: Items like rice, cooking oil, and medicine remain zero-rated.
- Transitional Rule: Goods invoiced before 1 July will follow the old tax rules.
â–£ Service Tax Expansion
- New Categories of Taxable Services: Including software development, logistics, brokerage services, commercial leasing, construction (non-residential), private healthcare (non-citizens), wellness, and beauty.
- Updated Rates:
- 8% SST on high-value services like brokerage, leasing, and financial services.
- 6% SST remains for standard taxable services.
- Thresholds:
- RM500,000/year for most services.
- RM1 million/year for leasing and brokerage.
- RM1.5 million/year for construction services.
Sources: FMM.org.my, BDO Malaysia, L&H Co, AJOBThing, Roedl & Partner
SST 2025: Impact on the Real Estate Sector
1. Construction Services
- 6% SSTÂ applies to non-residential construction (commercial, office, retail, industrial).
- Residential construction remains exempt.
- Transitional relief is available for contracts signed before 1 July 2025.
2. Commercial Leasing & Rental
- 8% SST applies to the leasing or renting of commercial and industrial premises.
- Residential rental income remains SST-exempt.
- New registration threshold: RM1 million/year.
- Transitional relief applies for fixed-price contracts until 31 December 2025.
3. Real Estate Agency Services
- 8% SSTÂ continues to apply to real estate agency services, including commissions.
- Agencies bundling other services (renovation, staging) must itemize and apply relevant SST.
The key change that directly impacts real estate agencies and their commissions falls under the expanded Service Tax (ST) on “Fee-based Financial Services.”
Service Tax Rate: Commissions, fees, or any other charges imposed on real estate brokerage services are subject to an 8% Service Tax. This is consistent with the general increase in the service tax rate from 6% to 8% for many taxable services.
Registration Threshold: Real estate agencies providing these services will be liable to register for and charge SST if their value of taxable services (i.e., commissions and fees) exceeds a specified threshold. For Fee-Based Financial Services, the threshold has been increased from RM500,000 to RM1,000,000 (within a 12-month period). This means smaller agencies with income below this revised threshold may be exempt from charging SST.
Scope: This specifically covers the commissions and fees charged by real estate agents and firms for facilitating property sales, rentals, and other related brokerage activities.
4. Property Management Services
- 8% SSTÂ now applies to management services for commercial buildings (if turnover > RM1 million/year).
- Residential management remains exempt.
- For mixed-use developments, SST must be allocated proportionally.
5. Foreign-Focused Developments
- Integrated developments (MM2H, expat housing) offering services like private healthcare and international education to non-citizens are now subject to 6–8% SST.
Frequently Asked Questions (FAQ)
Is SST charged on residential property sales?
No. Residential property transactions are SST-exempt.
Do I need to charge SST on residential rent?
No. SST does not apply to residential rentals.
Are real estate agent commissions taxed?
Yes. Real estate agency commissions remain subject to 6% SST.
Are renovation services subject to SST?
- Residential: generally exempt.
- Non-residential: subject to 6% SST.
Can SST be claimed like GST?
No. SST is a final, non-creditable tax.
Does SST apply to co-working spaces?
Yes. Commercial leasing—including co-working—is subject to 8% SST if annual turnover exceeds RM1 million.
Will property management fees increase?
Yes, for commercial buildings. Residential fees remain SST-exempt.
I’m a landlord. Can I absorb SST?
Yes, but it reduces your net income. Lease agreements must state this clearly.
What happens if I don’t register for SST?
Failure to register when required may lead to backdated taxes, penalties, and fines. Transitional relief is available until 31 December 2025.
Final Thoughts
The 1 July 2025 SST expansion is one of the most significant tax changes in recent years. For the real estate industry, this means preparing early—reviewing contracts, adjusting lease templates, educating clients, and registering if your taxable turnover exceeds thresholds.
Whether you’re a property investor, landlord, developer, or real estate agent, understanding these changes is crucial to ensure compliance and avoid unnecessary tax liabilities.
References
- FMM Malaysia – SST Expansion Guide
- BDO Malaysia – SST Expansion Booklet
- L&H Co – Tax Adjustments Overview
- Roedl & Partner – SST Scope Update
- AJOBThing – SST Explained
- Customs Malaysia – Leasing & Rental Guide
- The Star – Banking Associations on SST
Disclaimer
This article is based on publicly available information as of July 2025, sourced from the Ministry of Finance, Royal Malaysian Customs Department, and licensed advisory firms. While every effort has been made to ensure accuracy, MyPropertyPlaces.com provides this content for general educational purposes only. Readers are advised to consult licensed tax professionals for advice tailored to their specific circumstances. Tax laws and guidelines are subject to change without notice.
