Attention landlords and tenants! A crucial one-year service tax exemption period for certain commercial rental agreements is set to begin tomorrow, July 1, 2025. This is a significant transitional relief measure announced to help businesses locked into long-term, fixed-price contracts that were signed before the full enforcement of the 8% service tax on rental services.
If your tenancy agreement is “non-reviewable”—meaning its price cannot be changed—you may be eligible to be exempted from paying or charging the 8% service tax for a full year. However, there are very specific conditions that must be met. This guide breaks down everything you need to know.
Who Qualifies for This One-Year Exemption?
This tax exemption is not automatic. To qualify, your rental contract must be a
non-reviewable contract, and it must satisfy all five of the following conditions as outlined in the latest guidelines.
The 5 Conditions Your Contract MUST Meet:
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The Landlord is SST-Registered: The service provider (your landlord) must be a person registered for service tax.
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The Contract is Fixed: The contract must not contain any clause that allows for price revisions or value adjustments.
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The Contract was Stamped Early: The contract must have been made in writing, signed, and officially stamped by the Inland Revenue Board of Malaysia (LHDN) on or before June 9, 2025.
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The Contract Details are Clear: The contract must clearly state the (i) type of service provided, (ii) a fixed, non-variable contract value, and (iii) the duration of the contract.
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The Contract is Active: The contract must remain in force after July 1, 2025.
If your contract fails to meet even one of these conditions, it is not considered a qualifying non-reviewable contract, and the 8% service tax will apply as usual.
A Practical Example
Let’s say your company, a tenant, signed a 3-year office lease agreement on May 15, 2025. The monthly rent is fixed at RM10,000 with no clauses for any price changes. You had the agreement officially stamped by LHDN on June 1, 2025. Your landlord is an SST-registered company.
In this case, because your contract meets all five conditions, your landlord is exempted from charging you the 8% service tax on your rent for the period from
July 1, 2025, to June 30, 2026. However, starting from July 1, 2026, the service tax will be applicable.
What Should You Do Now?
With the exemption period starting immediately, all businesses involved in commercial rentals should:
- Immediately Review Your Contracts: If you are a landlord or a tenant in a long-term agreement, pull out your contract today. Check the signing date, the stamping date, and review all clauses against the 5-point checklist above.
- Communicate Clearly: If you are a landlord who qualifies for this exemption, inform your tenant. If you are a tenant who believes you qualify, have a conversation with your landlord to ensure the service tax is not being charged incorrectly for the next 12 months.
Expert Guidance on SST Transitional Rules
Navigating specific SST exemptions and transitional rules requires careful document review and a clear understanding of tax regulations. Misinterpreting these conditions could lead to either overpaying tax or failing to comply, resulting in future penalties.
At SMONE, we can help you review your tenancy agreements to determine if you are eligible for this valuable one-year exemption. We ensure our clients are not overpaying or incorrectly charging SST.
Contact us today for a professional consultation to ensure your business is fully compliant and financially optimized.
(Disclaimer)
This article is for general informational purposes. It does not constitute legal or tax advice. Please consult with a qualified professional for advice tailored to your specific situation.