Malaysia Tax and SST Update - Guidance for Businesses
Keeping up with Malaysia’s tax developments is crucial for businesses and investors. As of October 2025, several significant changes have taken effect, impacting sales & services tax (SST), high-income dividend taxation, and the business tax landscape. Here’s what you need to know:
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Expanded Sales & Services Tax (SST) Now in Effect
As part of Malaysia’s Budget 2025, an enhanced Sales and Services Tax (SST) framework took effect on July 1, 2025. The revised SST regime now covers a wider range of non-essential and luxury goods (taxed at 5%–10%), while essential goods remain exempt. The scope of service tax has also grown to include sectors such as leasing, logistics, financial services, private healthcare, education, and beauty industries.
Action Point:
Businesses must update their accounting systems, review contracts, and ensure proper SST registration. The government has granted a grace period until December 31, 2025 for compliance without penalty.
If you require assistance with tax compliance or understanding your obligations, consult our tax advisory experts.
Why it matters:
This move aims to strengthen fiscal sustainability while minimizing the burden on everyday essentials, supporting long-term national development.
Budget 2026: No New Taxes, Focus on Refinement
Ahead of the Budget 2026 announcement, the Malaysian government has confirmed there will be no new tax hikes. Instead, policymakers are refining existing tax structures, expanding the SST base, and introducing digital compliance tools such as e-invoicing. While discussion of a carbon tax continues for Malaysia’s climate goals, it remains in the planning stage and is not implemented in 2025.
Why it matters:
This policy stability encourages investment and business planning, giving companies confidence in the predictability of the Malaysian tax environment for the year ahead.his policy stability encourages investment and business planning, giving companies confidence in the predictability of the Malaysian tax environment for the year ahead.
For strategic business or tax planning, reach out to Terra Advisory Services for guidance.
New Dividend Tax for High-Income Shareholders
As of the Year of Assessment 2025, a new tax applies to high-net-worth individuals:
- A 2% tax is now levied on dividend income exceeding RM100,000 per year for individuals.
This reform, part of Budget 2025, is designed to encourage a more balanced tax contribution from wealthier Malaysians.
Impact on investors:
Those with significant dividend earnings should plan their finances accordingly. Companies may also revisit dividend distribution strategies to accommodate shareholder needs.
Key Takeaways
- SST is broader than ever—review your product and service portfolios for compliance.
- No new taxes in Budget 2026—expect stability and incremental refinements.
- Dividend tax targets high earners—a consideration for personal and corporate finance planning.
Staying updated and compliant is vital. For more detailed guidance, consult the Royal Malaysian Customs Department or your tax advisor.
Frequently Asked Questions
Q: Are essentials like food and medicine still exempt from SST?
A: Yes, essentials remain exempt under the expanded SST framework.
Q: Will there be a GST reintroduction in Malaysia soon?
A: As of October 2025, there are no confirmed plans to reintroduce GST. SST remains in place.
Q: Who is affected by the new dividend tax?
A: Individual taxpayers with dividend income above RM100,000 per year are subject to the new 2% tax.
Speak to our specialists today and discover how we can help your company stay compliant and tax-efficient.
Disclaimer: This article summarizes verified updates and does not constitute professional tax advice. Please consult a qualified tax advisor or Malaysian authorities for advice specific to your situation.