SST Expansion 2025: Why Short-Term Rental Operators in Malaysia Need to Pay Att ention

The Ministry of Finance’s latest expansion of the Sales and Service Tax (SST), effective 1 July 2025, has introduced a major shift for many industries. One sector that will be notably affected but often overlooked is the short-term rental (STR) market, particularly operators managing properties on platforms like Airbnb, Booking.com, and Agoda.

What’s Changing?

Starting 1 July 2025, leasing and rental services will be subject to 8% Service Tax, unless explicitly exempt. While residential leases for long-term stay remain exempt, short-term rentals for commercial purposes are now included in the taxable scope.

Under this rule, businesses providing short-term rental accommodation are required to register for SST once their taxable turnover exceeds RM500,000 per year.

Who Will Be Affected?

While casual hosts with one or two listings are unlikely to hit the threshold, commercially run short-term rental businesses, especially in cities like Kuala Lumpur, Penang, Johor Bahru, and Kota Kinabalu—are a different story.

Based on industry data and operator practices:

• A commercial STR operator typically manages 15–30 units.

• With average monthly rental income of RM2,500–RM4,000 per unit, an operator managing just 12 to 15 units will easily surpass RM500,000 annual revenue, triggering mandatory SST registration.

• At 20 units, an operator could exceed RM800,000–RM1 million in annual turnover, making them well within the SST net.

What Does This Mean for Operators?

1. Higher Compliance Burden

   Operators will need to:

   • Register for Service Tax with Royal Malaysian Customs

   • Charge and account for 8% tax on each rental transaction

   • Submit monthly SST returns

   • Maintain proper invoicing and record-keeping, especially with e-invoicing rolling out in parallel

   
   

2. Impact on Pricing Strategy

   The additional 8% SST could significantly affect the pricing competitiveness of STR listings. Operators must decide whether to absorb the tax or pass it on to guests—which could impact demand.

   
   

3. Risk for Non-Compliance

   Many foreign-managed or unregistered operators may unknowingly fall into non-compliance. Customs is expected to increase enforcement, especially with digital platforms sharing booking data for tax audits.

   
   

Are There Any Exemptions?

Yes. Long-term residential rentals are exempt. But for short-term rentals of Malaysian residential property, SST will apply if the turnover threshold is exceeded.

What Should STR Operators Do Now?

• Review your annual rental income to determine SST exposure

• If approaching RM500,000 in turnover, prepare to register with MySST

• Adjust invoicing, systems, and pricing strategy to account for the new tax

• Seek tax advisory support if unsure about your SST obligations

• Monitor updates on e-invoice implementation, as this ties into compliance

Conclusion

The era of informal, lightly regulated short-term rentals in Malaysia is coming to an end. The SST expansion marks a move toward greater formalisation of the sector. If you’re a commercial operator managing 15–20+ units, now is the time to act—not just to stay compliant, but to stay competitive in a more regulated marketplace.

For guidance on SST registration, e-invoice setup, or accounting system integration, contact vincentwong@4cadvisory.my or WhatsApp +6011-7516-3007.