Intra-Group Relief Under Service Tax: What Every Business Group Must Know

Published: 2 Oct 2025

If you're running a group of companies in Malaysia

where Company A charges management fees to Company B, or Company C provides IT or accounting services to Company D

you’re probably familiar with these common intra-group arrangements.

It’s normal for companies under the same group to support each other.

BUT, did you know? 💸
Even services between "re lated companies" are subject to 6% or 8% Service Tax if they are taxable services! Unless you apply Intra-Group Relief!

What Is Intra-Group Relief?

The Royal Malaysian Customs Department (RMCD) allows exemption from service tax on taxable services provided between companies within the same group, subject to strict conditions.

This is known as Intra-Group Relief.

Who Qualifies as a "Group"?

According to Service Tax Regulations 2018 (P.U.(A) 214/2018):

“Companies are considered part of the same group if there is direct or indirect control more than 50%, or if a person holds 20% to 50% and controls the composition of the board of directors”.

You qualify if:

• ✅ One company directly owns more than 50% of another;
• ✅ Or indirectly controls through subsidiaries;
• ✅ Or holds between 20% to 50% with control over most of the board members.

Which Services Are Eligible for Exemption?

If you’re within the same group, you may be exempt from service tax only for specific taxable services, mainly under:

• Group G: Legal, legal on Islamic matters, accounting, surveying, engineering, architectural, consultancy, information technology (IT), management, digital services.
• Group K: Leasing or rental services.

Beware of the 5% Threshold Rule

It’s not enough to say you’re in the same group. To qualify for the group relief, you must comply with the 5% rule:

“If more than 5% of your total revenue for that taxable service comes from external (non-group) customers, the entire service becomes taxable - even to group members.”

Example:

You run an internal IT service company and:

• RM 940,000 revenue is from related companies
• RM 60,000 from third-party customers
• Total: RM 1,000,000
• External revenue = 6%, which exceeds 5%

Result: Entire RM 1,000,000 is now subject to Service Tax of 8%
You’ll have to pay: RM 1,000,000 x 8% = RM 80,000

What Should Business Owners Do?

If you’re charging between companies within your group for:

• Management services
• IT support
• Accounting
• Rental of systems, equipment, or space

Then:

1. Confirm your group structure meets RMCD’s definition
2. Check if your service is listed in Group G or K
3. Monitor your 5% threshold to maintain exemption

Don't Pay What You Can Legally Avoid

Group Relief is a powerful, 100% legal tax-saving mechanism - but only if you understand and comply with the rules.

✅ SST savings = more cash flow for your business
❌ Mistakes = backdated tax + penalties

References

• Service Tax Regulations 2018 (P.U.(A) 214/2018)
• Service Tax Policy No. 8/2020
• Service Tax Policy No. 2/2025 (Rental)

For more detailed compliance or application steps, consult the RMCD’s guidelines or your licensed tax advisor.

⚠️ Need Help?

YYC’s tax professionals are ready to guide your business through this SST expansion with:

• ✅ SST Registration & Readiness Review
• ✅ SST Classification of Goods & Services, & B2B exemption/ intragroup relief
• ✅ Custom ruling / Sales tax exemption application
• ✅ Internal SST Training for Finance Team
• ✅ Ongoing SST Compliance Consultation

Book a consultation with YYC today and ensure your business is 100% SST-ready.