SST on Rental or Leasing Services - 8%: What Entrepreneurs Need to Know

Published: 21 August 2025

Effective from 1 July 2025, Malaysia’s Service Tax (SST) rules on rental or leasing services have been updated. If you’re in the leasing or rental industry, it’s important to know when you are required to register and begin charging 8% SST - and when you don’t need to.

Who Needs to Charge 8% SST on Rental Services?

Under the new rules issued by the Ministry of Finance, you are required to register for SST and charge 8% if:

• Your total taxable rental or leasing income is more than RM 1 million in any 12-month period pursuant to P.U. 201/2025; and
• The service you provide falls within the “leasing or rental” category as prescribed under the P.U. (A) 172/2025.

This is an increase from the previous RM 500,000 threshold, giving more breathing space to small and micro businesses.

Examples of Rental Services Covered

The 8% SST may apply if you rent out or lease:

• Vehicles – cars, vans, lorries, machinery, or heavy equipment
• Industrial or commercial equipment – construction machinery, tools, manufacturing equipment
• Furniture, appliances, or electronics – for events, offices, or short-term business use

Note: Certain rental of tangible asset (e.g., housing accommodation, reading material etc) are not subject to SST — always check the official taxable service list.

What Rental Suppliers Must Do Under SST

Scenario 1 - Rental Company as a Lessor (Core Business)

Assume you are a supplier renting out heavy machinery:

• Monthly rental fee                          : RM 50,000
• Service Tax @ 8%                         : RM 4,000
• Total invoice billed to customer : RM 50,000 + RM 4,000 = RM 54,000

For the supplier:

• You must collect RM 54,000 (including SST) from the customer.
• The RM 4,000 is not your income - it must be accounted for and remitted to Royal Malaysian Customs Department (RMCD) as SST.
• Only RM 50,000 remains as your business revenue.

This shows how suppliers act as “tax collectors” on behalf of the RMCD, while customer bears the actual SST.

Scenario 2 - Trading Company with Rental Income

Even if your main business is trading, SST rules still apply if you also earn rental income.

Example: A trading company that sells office supplies also rents out 200 printers (taxable service below RM 1 million):

• Monthly rental collected: RM 80,000
• Annual rental turnover: RM 960,000 → below RM 1 million → no SST registration required.

But if the rental business expands and annual rental hits RM 1.2 million (taxable service exceeded RM 1 million):

• Monthly rental fee: RM 100,000
• Service Tax @ 8%: RM 8,000
• Total invoice billed to customer: RM 108,000
• Out of this, RM 8,000 must be remitted to RMCD, while RM 100,000 remains your company’s revenue.

👉 This means even non-rental businesses must monitor their rental income separately. Once it crosses RM 1 million, SST obligations apply — regardless of your main business activity.

How 8% SST Impacts Your Business Costs

Now imagine you are the customer, renting hundreds of computers and printers every month at RM 100,000:

• Monthly SST @ 8%: RM 8,000
• Extra yearly cost: RM 8,000 × 12 = RM 96,000

This increase can:
✅ Reduce your profit margin
✅ Put pressure on cash flow
✅ Potentially force you to increase prices, passing the cost to customers

That’s why business owners should act early - review rental expenses, reassess supplier contracts, and consider renegotiating terms to manage the impact.

If Your Turnover is RM1 Million or Less

If your annual taxable turnover is RM 1 million or below, you are not required to register for SST and charge 8%.

However, track your revenue closely because once you exceeded the RM 1 million threshold within a 12-month period, registration becomes mandatory under Section 12 of the Service Tax Act 2018.

Key Takeaway for Entrepreneurs

If you are in the rental or leasing business, remember:

Annual taxable rental income over RM 1 million = Register for SST and charge 8%.

The updated threshold is designed to reduce the compliance burden for smaller operators while ensuring larger-scale rental businesses contribute under the SST framework.

Reference:

• Ministry of Finance, Media Release - “Revision to the Expanded Sales Tax and Service Tax” (27 June 2025)