Service Tax On Rentals For MSMEs Reduced To 6 Pct – PM Anwar

KUALA LUMPUR, Jan 5 (Bernama) -- Service Tax on rentals for micro, small and medium enterprises (MSMEs) has been reduced to six per cent from eight per cent, said Prime Minister Datuk Seri Anwar Ibrahim.

The eight per cent tax was implemented on July 1, 2025, and applies to the rental of non-residential premises such as offices, warehouses and commercial assets.

“The Service Tax on rentals has indeed been an issue because it rose from zero to eight per cent.

“So far, I am only able to reduce it to six per cent, with a loss of nearly half a billion ringgit in revenue annually,” he said in his New Year’s address today.

Anwar, who is also the Finance Minister, said newly established MSMEs will enjoy a one-year deferment of the Service Tax on rentals.

The tax exemption threshold for MSMEs will be increased to include those with an annual turnover of up to RM1.5 million. Previously, tax exemptions applied only to businesses with an annual turnover between RM500,000 and RM1 million. 

“We have decided to exempt MSMEs with annual sales ranging from RM500,000 to RM1 million, and we are now extending the exemption to those with total annual sales of up to RM1.5 million,” he said.

Meanwhile, the government has also granted sales tax exemptions on raw materials or critical inputs used by registered manufacturers, particularly for the production of goods related to the livestock and agricultural sectors, as a measure to help control the prices of essential goods for the public.

The exemptions cover animal feed, fertilisers and pesticides, in line with efforts to ensure stability in production costs and the national food supply chain.

The Ministry of Finance also announced that the Service Tax exemption for construction contracts signed before July 1, 2025, and without a review clause, has been extended by another year until June 30, 2027.

With this extension, the affected construction contracts will enjoy Service Tax exemption for a period of two years from the implementation of the expanded Sales and Service Tax (SST), said Anwar.

In addition, construction services for places of worship such as surau, mosques, temples, churches and shrines that are religious and spiritual in nature are also exempt from Service Tax, effective July 1, 2025.

-- BERNAMA