If you are planning to expand your business into Malaysia, you are likely asking the question “What is SST tax?”
SST refers to the Malaysian sales and service tax, where a sales tax is imposed at the manufacturer level, and a service tax is paid by consumers who are using taxable services.
Tax regulations are relatively fluid in Malaysia compared to neighbouring regions, which can make compliance challenging to maintain. This is why many growing businesses partner with a corporate services team who can help them navigate multi-country taxes as they evolve.
Read on as BoardRoom’s Tax & Accounting Managing Director for Asia, Eunice Hooi, provides an overview of how SST works, who needs to register for SST Malaysia, and what you can do as a taxable person to ensure compliance.
Did SST replace GST?
In 2018, the Malaysian Government reintroduced sales and service tax to replace the goods and services tax (GST), which reformed the local tax system.
“Many people actually believed that GST had increased the cost of living since it was implemented,” Eunice says. “Therefore, the main objective of this abolishment was to put more purchasing power in the hands of the Malaysian people – especially the lower- to middle-income earners – which would result in a much higher disposable income.”
SST vs GST: What businesses should know
Both SST and GST are taxes on goods and services, but they are applied in different ways:
- GST (Goods and Services Tax): GST was a multi-stage tax charged at every step of the supply chain, from production to sale. Businesses can claim back the tax they have already paid through input tax credits.
- SST (Sales and Service Tax): SST Malaysia is a single-stage tax. Sales tax is charged only once at the manufacturer or importer level, while service tax in Malaysia applies only when a consumer pays for a taxable service.
The shift from GST to SST was designed to simplify the tax system and reduce the cost to end consumers. However, businesses still need to carefully follow the SST requirements Malaysia has in place, as not complying can lead to penalties.
How SST works in Malaysia: definition and rates
SST is an indirect tax made up of the following components.
Sales tax in Malaysia
The sales tax component of SST is imposed on products manufactured and produced locally and on taxable goods imported into Malaysia. It is charged to consumers based on the purchase price of certain goods and services.
The sales tax is only imposed at one stage of the supply chain (at the time of the goods’ sale or disposal).
The sales tax rate in Malaysia ranges from 5%, 10% or another specified rate, depending on the type of goods.
Your business is required to pay SST if your total sales value of taxable goods has exceeded RM 500,000 in the past 12 months.
Service tax in Malaysia
The service tax is a consumption tax imposed on taxable services provided in Malaysia by a registered business.
The rate for service tax is 6% in Malaysia.
Your business is required to pay SST if your total value of taxable services within 12 months exceeds the prescribed threshold, which is usually RM 500,000. Some services have a different threshold (for example, the threshold for operators of restaurants and cafes is RM 1.5 million).
How to register for SST
If your business’s annual income has exceeded the respective thresholds for sales or service tax, you need to register for SST on the MySST website. A tax professional can assist you with this process. Understanding who needs to register with SST Malaysia is crucial, as registration ensures you remain compliant with local regulations.
Is there anything or anyone exempt from SST in Malaysia?
In Malaysia, imported or exported services are exempt from service tax, as are goods manufactured for export.
Other exempted goods include:
Manufacturers of non-taxable goods are exempt from SST, as are certain government bodies and educational institutions.
You can view complete lists of exempted goods, services and persons on the MySST website.
Exemption rules can be complicated, and the ramifications for tax evasion are severe. This is why it is a good idea to consult a tax professional who can help determine whether SST applies to your business and whether your company qualifies for exemption under the SST requirements Malaysia has in place.
While many goods and services remain exempt, businesses should also take note of the expanded SST framework, which has been in effect since 1 July 2025, introducing new taxable categories and thresholds.
Updates on Malaysia’s Expanded Sales and Service Tax (SST) Now in Effect
As announced in Malaysia’s Budget 2025, the expanded Sales and Service Tax (SST) framework took effect on 1 July 2025, broadening the scope of taxable goods and services. This major update aims to strengthen Malaysia’s fiscal position while maintaining affordability for essential items.
Under the expanded SST Malaysia, several new goods and services now fall under the taxable category, while essential items remain exempt.
Key updates include:
- Non-essential and premium goods such as imported fruits, silk, king crabs, racing bicycles and antique artworks are now taxable at rates ranging from 5% to 10%.
- New taxable service sectors include rental and leasing, construction, financial services, private healthcare, private education, and beauty services.
- Service tax rates vary between 6% and 8%, depending on the sector.
- A grace period applies until 31 December 2025, allowing businesses time to adapt, with no penalties enforced during this transition phase.
- Exemptions remain for essentials such as basic consumer goods, residential buildings, educational services for Malaysian students, and basic financial services.
These changes have significant implications for compliance, particularly for businesses in newly taxable sectors. Companies should review their SST registration obligations and ensure compliance through the MySST portal.
To gain a deeper understanding of how these updates may affect your sector, refer to our article “Malaysia’s Expanded Sales and Services Tax (SST) Takes Effect on 1 July 2025.”
If your business falls within the newly taxable categories, now is the time to review your SST obligations. BoardRoom’s tax specialists can provide tailored guidance on registration, exemptions, and compliance strategies under Malaysia’s updated tax framework.
Is SST different from company tax?
Another common question among businesses branching into Malaysia is “What is the company tax rate?”
When it comes to understanding how to pay tax in Malaysia, business leaders should first learn the difference between SST and company tax.
While SST is imposed by the Royal Malaysian Customs Department, corporate tax Malaysia is imposed by the Inland Revenue Board.
“Corporate tax is governed under the Income Tax Act 1967, which applies to all companies registered in Malaysia for chargeable income derived from Malaysia, including profits, dividends, interest, rentals, royalties, premiums, and other income,” Eunice explains.
Currently, the general rate for corporate income tax in Malaysia is 24%.
What is required of businesses to comply with SST?
All companies doing business in Malaysia – no matter their size – should do the following to ensure compliance with SST:
If your business is liable for SST, ensure that you:
Ensuring SST compliance can be an arduous process, which is why many businesses in Malaysia choose to engage a skilled corporate services provider for ongoing support.
What you may not know about Malaysian taxation
As a business leader, it is important that you stay aware of local taxation developments and discourse. With this knowledge, you will be able to make smarter decisions when it comes to company strategy and forward planning.
Some of the latest tax facts you should know include:
- In its first year of implementation, Malaysia’s digital services tax brought in more than RM 400 million for the government. With the uptake of digital tools and streaming services on the rise, this indirect tax will likely provide a significant revenue stream for the government in the coming years.
- A tax exemption for SST on cars ended on 30 June 2022 after an extension was provided as part of the Malaysia Budget 2022. The exemption was introduced in 2020 to help automotive companies survive the impacts of the COVID-19 pandemic and also stimulate local economic growth.
- Malaysia’s tax regulations are in a near-constant state of flux. Malaysia’s 2023 budget is set to be retabled, meaning businesses must be ready to adapt to potential new tax requirements in the near future.
- Many companies find that outsourced accounting and tax services benefit their business by ensuring they meet regulatory requirements, particularly as they grow and evolve.
Maintain SST compliance in Malaysia with the help of a tax professional
Navigating Malaysia’s tax landscape can be complex and time-consuming, especially for new businesses. In contrast to neighbouring countries, tax regulations and rates in Malaysia change so often that the tax research you performed at the start of your expansion journey may no longer be relevant just six months later, such as with the reintroduction of SST.
To ensure smooth and successful business growth, and to answer any of your questions about sales and service tax in Malaysia or otherwise, contact a local tax professional who can help ensure your Malaysian venture is fully compliant from the start.
Contact us to find out more.
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