TaxSavvyMY

Construction services under service tax

Is construction work now subject to service tax?

The situation

From 1 July 2025, construction work services became taxable, with a RM1.5 million threshold and a 6% rate.

The law

  • Service tax scope expansion from 1 July 2025 (rental, construction, financial, healthcare, education): New taxable services with own thresholds: rental RM1 million, construction RM1.5 million, education nil
  • Service Tax (Rate of Tax) Order, as amended 2025: Service tax at 8%; 6% for food and beverage, telecoms, parking, logistics, construction, education and others

What it means for you

Residential construction and related public facilities are exempt, with an apportionment method for mixed developments. Contracts signed before 1 July 2025 and stamped by 31 December 2025 had an exemption to 30 June 2026. Tax applies when materials and labour are invoiced separately; check your contract terms.

What to do

  1. Check contract dates and type.
  2. Apply residential exemption where valid.
  3. Register if above RM1.5 million.
  4. Charge 6% on taxable portion.

We can do this for youService tax registration and SST-02 returns: MYR 800

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