4C View : From Beauty to Airbnb: Who Gets Hit in Malaysia’s SST Overhaul?

The Ministry of Finance has announced changes to the Sales and Service Tax (SST) framework in Malaysia, effective 1 July 2025.

Sales Tax

The scope of sales tax will be expanded to include certain low-value imported goods (especially via online platforms). However, the impact on the general public is expected to be minimal, as these measures mostly target foreign-sourced items.

Service Tax (Key Changes)

The changes in service tax are more significant. These can broadly be grouped into two categories:

Changes Affecting Non-Malaysians:

• Private healthcare and private educational services provided to non-citizens will now be subject to 8% service tax.

• Services provided to Malaysians remain exempt.

Changes Affecting Malaysians (Individuals and Businesses):

(A) Beauty Services:

• Service tax at 8% will apply to beauty and wellness services, including:

• Facial treatments

• Manicure and pedicure

• Tattooing, body piercing

• Waxing, aesthetic services, etc.

This applies if the provider’s annual turnover exceeds RM500,000.

Scope is broad, and many independent contractors or salons may now fall within SST scope.

(B) Leasing and Rental Services:

• An 8% service tax will be imposed on:

• Leasing and rental of movable or immovable property, including vehicles, machinery, commercial properties, and more.

  
  

• Exemptions include:

  Residential property rental

  Rental of books and reading materials

  Financial leases

  Leasing of assets located overseas

  
  

  This affects:

• Commercial property leasing

• Industrial equipment rental

• Car rental companies

• Short-term rental operators (e.g. Airbnb hosts), especially those with turnover exceeding RM500,000 annually.

(C) Financial Services:

• Commission-based financial services will be subject to 8% service tax.

Includes:

• Asset/fund management

• Stockbroking and brokerage commissions

• Investment advisory services

Note: Core banking and lending services remain exempt.

From 1 July 2025, service tax will apply more broadly across sectors like beauty, leasing, and financial services, with targeted exemptions. Businesses above RM500,000 turnover should assess their SST registration obligation and pricing impact.

Essential goods and vital services for Malaysians remain untouched, while the expanded SST targets mainly non-essential services and luxury goods.

The expanded scope of SST is expected to lead to an increase in tax compliance costs, as businesses will need to ensure accurate reporting—particularly in the context of Malaysia’s upcoming e-invoicing implementation.

Certain sectors, such as short-term rental operators, may face greater challenges in complying with the new requirements. This is especially true where the operators are foreign-run entities, and where awareness of local tax obligations remains low.

If you need assistance navigating SST registration and implementation, feel free to contact me at vincentwong@4cadvisory.my or WhatsApp +6011-7516-3007.