Global Daily Tax News, Malaysia To Implement Sales And Service Tax Overhaul, (Jun 12, 2025)

The Malaysian Government has confirmed that major changes to the sales and service tax regime will be implemented from July 1, 2025.

The Government intends to maintain the sales tax exemption for basic food items; increase sales tax on non-essential items, including premium goods; and expand the scope of the service tax.

The July 1 implementation date was confirmed following the publication of implementing legislation in the nation's Official Gazette.

The Government has confirmed that the following "essential items" will benefit from a zero percent rate of sales tax:

• chicken, beef, mutton, fish, prawns, squid, and canned sardines;

• vegetables and local fruits;

• rice;

• wheat, barley, oats, and flour;

• salt and sugar;

• white bread;

• pasta;

• noodles;

• milk;

• cooking oil;

• medicine and medical devices;

• books, journals, and newspapers; and

• pet food.

The zero percent sales tax rate will also be retained for basic construction materials, such as cement, stones, and sand, as well as for agricultural inputs including fertilizer and pesticides, and agricultural and livestock machinery.

Newly, a five percent rate of sales tax will apply to king crab, salmon, cod, truffle mushrooms, imported fruits, essential oils, silk fabrics, and industrial machinery.

A 10 percent rate of sales tax will apply to premium items, such as racing bicycles and antique hand-painted artworks.

Under the expansion of the service tax scope, six new categories of services will be taxable:

• the leasing or rental of specified movable or immovable property at a rate of eight percent, on companies with turnover exceeding MYR500,000 (USD118,000);

• construction, at a rate of six percent on B2C supplies covering projects other than residential buildings or public amenities relating to housing, on contractors with turnover exceeding MYR1.5m;

• financial services, at a rate of eight percent on commissions and fees, with a wide range of financial services to be exempt, including traditional banking services.

• private healthcare at a rate of six percent on certain services, on providers with turnover exceeding MYR1.5m;

• certain private education services, at a rate of six percent; and

• beauty services, at a rate of eight percent, on providers whose turnover is MYR500,000 or more during a 12-month period.