Indirect Tax Alert
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Issue No. 14/2025 | 1 August 2025
Service Tax Policy No. 1 to 5 of 2025 – Service Tax Treatments on Recent Expansion of Scope
The Royal Malaysian Customs Department (RMCD) had issued the following Service Tax Policy (STP) on 29 June 2025:
- STP No. 1/2025 – Financial Services
- STP No. 2/2025 – Rental or Leasing Services
- STP No. 3/2025 – Construction Works Services
- STP No. 4/2025 – Education Services
- STP No. 5/2025 – Private Healthcare Services
The above STPs were issued to inform that the Minister of Finance (MOF) has granted exemptions from payment of services tax with effective from 1 July 2025 for the above taxable services provided to certain persons or under certain situations and transactions, subject to the relevant conditions (if any) being fulfilled.
Subsequent to the issuance of the above STPs, RMCD issued the following amendments to the STPs:
- STP No. 1/2025 (Amendment No. 1) dated 30 July 2025
- STP No. 2/2025 (Amendment No. 1) dated 24 July 2025
- STP No. 4/2025 (Amendment No. 1) dated 24 July 2025
- STP No. 5/2025 (Amendment No. 1) dated 24 July 2025
The key salient points of the above STPs and their amendments are appended below for your reference:
STP No. 1 to 5 of 2025
- Exemption from being subject to compound, prosecution, and penalty until 31 December 2025 for the 5 offences (late registration, late submission of returns, late payment, incorrect declaration and errors related to invoices, credit notes or debit notes) has been removed.
STP No. 1/2025 – Financial Services
- Exemption from service tax on all financial services in the First Schedule, Group H, Service Tax Regulations 2018 (“STR”) excluding the list of financial services in Appendix A effective from 1 July 2025.
- Federal and state governments are exempt from service tax.
- Local authorities are exempt from charging and paying service tax from 1 July 2025 to 30 September 2025.
- Services provided under non-reviewable contracts are exempt from service tax for 1 year from 1 July 2025 to 30 June 2026, subject to the conditions being fulfilled.
- Business-to-business (“B2B”) exemptions are available for taxable financial services (excluding certain services) involving transactions between two financial service providers registered under Group G, First Schedule of STR.
- Imported taxable financial services (excluding certain services) acquired by financial service providers registered under Group G, First Schedule of STR are exempt from payment of service tax subject to the conditions being fulfilled.
- Exemption from service tax on certain fees charged by Bursa Malaysia in relation to certain transactions on Bursa Malaysia (the Main, ACE and LEAP markets).
- Exemption from service tax on certain fee based Islamic financial services subject to the conditions being fulfilled.
- [New] Exemption from service tax on management services for fixed price funds under Permodalan Nasional Berhad (PNB) including Amanah Saham Bumiputera (ASB) and Amanah Saham Malaysia (ASM).
- [New] Exemption from service tax on fee-based financial services on transactions relating to securities issued and guaranteed by the Federal or State Governments.
STP No. 2/2025 – Rental or Leasing Services
- Federal and state governments are exempt from service tax.
- Local authorities are exempt from charging and paying service tax from 1 July 2025 to 30 September 2025.
- Services provided under non-reviewable contracts are exempt from service tax for 1 year from 1 July 2025 to 30 June 2026, subject to the conditions being fulfilled.
- Small & Micro Enterprises can benefit from exemption from service, subject to condition fulfilment via the MyPMK system.
- Exemption from service tax is available for intra-group rental or leasing services subject to the condition being fulfilled.
- [New] Rental or leasing services of aircraft (excluding drones) and ships (excluding floating platforms) are exempt from service tax with effect from 4 July 2025.
STP No. 3/2025 – Construction Works Services
- Federal and state governments are exempt from service tax.
- Local authorities are exempt from charging and paying service tax from 1 July 2025 to 30 September 2025.
- Services provided under non-reviewable contracts are exempt from service tax for 1 year from 1 July 2025 to 30 June 2026, subject to the conditions being fulfilled.
STP No. 4/2025 – Education Services
- Specific fees and charges listed in Appendix A (including book charges, transportation, and others which are not related to tuition fees) are exempt from service tax.
PwC Comment
The exemptions provided in the above STPs and their amendments are intended to minimize the impacts of the expansion of scope of service tax in certain transactions. We believe that the MOF and RMCD are still looking into fine-tuning and updating the exemptions as the industry and businesses provide feedback to them. We will keep you updated if there are further amendments to the above STPs.
If you have any questions on the above exemptions or amendments to the STPs, please do not hesitate to contact us and we would be happy to assist you.
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