Malaysia Commercial Rental SST 2026: The Rate Is Now 6% — But Who Actually Has to Pay?

A factory in Shah Alam is rented for RM100,000 per month.

Annual rental: RM1.2 million.

Does the landlord simply add 6% SST and issue an invoice for RM106,000 every month?

Not necessarily.

Malaysia’s Service Tax rules for rental and leasing services have undergone substantial changes since the expansion of SST in 2025. More importantly, the Government introduced further concessions effective 1 January 2026, including reducing the Service Tax rate on rental and leasing services from 8% to 6% and expanding relief for qualifying micro, small, and medium enterprises (MSMEs/PMKS).

For commercial property owners in Selangor and Kuala Lumpur, this is no longer merely a tax-accounting issue.

It can directly affect rental negotiations, lease structures, tenants’ occupancy costs, and ultimately the investment yield of commercial and industrial properties.

The Important Update: Rental SST Is Now 6%

Malaysia expanded the scope of Service Tax to include rental and leasing services from 1 July 2025.

The original rate applicable to the newly expanded category was 8%. However, on 5 January 2026, the Ministry of Finance announced several policy improvements effective from 1 January 2026.

For rental and leasing services, the rate was reduced:

8% → 6%.

The Ministry explained that the change was intended to support businesses and industry.

The Royal Malaysian Customs Department’s current MySST guidance now also identifies rental or leasing services as being subject to the 6% rate from 1 January 2026.

That means property owners should be careful when referring to older 2025 articles, tenancy templates, or tax calculations that still quote 8%.

Those materials may no longer reflect the current position.

Residential Rental and Commercial Rental Should Not Be Treated the Same Way

One of the biggest mistakes is assuming SST now applies to every property rented in Malaysia.

That is not correct.

Royal Malaysian Customs guidance distinguishes residential property rental from taxable commercial rental. Its published examples state that rental of a residential property is not subject to Service Tax, while warehouse rental may fall within the taxable rental regime.

Therefore, an individual renting out a residential condominium should not automatically assume that 6% SST must be added simply because Malaysia introduced Service Tax on rental services.

Commercial property requires much closer attention.

This includes assets such as:

• Factories

• Warehouses

• Offices

• Retail premises

• Other commercial or industrial properties, subject always to the applicable statutory provisions, registration rules, and exemptions.

  
  

Landlords Should Understand the Registration Threshold

Service Tax is not simply determined by looking at one month’s rental.

Under Malaysia’s SST framework, a person providing taxable services becomes liable for registration when the value of taxable services exceeds the prescribed threshold, applying the relevant registration rules.

When rental SST was first introduced, the proposed threshold was RM500,000. It was subsequently raised to RM1 million following industry feedback in June 2025.

This distinction is important because people sometimes confuse two completely different RM1 million figures:

• The service provider’s registration threshold, and

• The tenant’s MSME exemption test under the earlier framework.

  
  

They are not the same concept.

Then, from 1 January 2026, the Government further expanded relief for qualifying MSME tenants.

The RM1.5 Million MSME Relief Is Particularly Important

The Ministry of Finance announced that, effective 1 January 2026, the annual sales limit for qualifying MSME tenants to receive relief from Service Tax on rental or leasing services was increased from:

RM1 million → RM1.5 million.

Newly established MSMEs were also given a one-year exemption on qualifying rental or leasing services from their business registration date, subject to the applicable requirements.

The latest Royal Malaysian Customs Guide on Rental or Leasing Services, Version 2, updated to 14 May 2026, provides further administrative requirements.

For example, qualifying MSMEs need to make the required declaration and registration through Customs’ MyPMK system. For newly established MSMEs, Customs also specifies continuing income tax and information update requirements relevant to maintaining the relief after the initial period.

This creates an important practical issue for landlords:

Do not decide whether SST should be charged merely because a tenant verbally says, “My company is an SME.”

The applicable qualification and documentation should be established properly.

Consider a RM30,000-Per-Month Factory

Suppose a landlord rents a factory in Klang for:

RM30,000 per month.

Annual rental: RM30,000 × 12 = RM360,000.

If the landlord is not required to be registered under the applicable rental-service rules because the relevant taxable-service threshold has not been reached, the landlord should not simply add 6% SST because another landlord does.

Now consider a property company with several factories generating taxable rental services exceeding the applicable registration threshold.

If the company is a registered person and the rental supplied to the particular tenant is taxable, the calculation may be:

RM30,000 × 6% = RM1,800 SST.

Monthly amount payable: RM31,800.

Over 12 months, the SST component alone would be:

RM21,600.

For a tenant operating on tight manufacturing margins, RM21,600 is not irrelevant.

Scale the example to a RM200,000-per-month industrial facility and the commercial effect becomes considerably larger.

Rental Negotiations Should Therefore Be Based on Occupancy Cost, Not Rent Alone

Imagine two factories.

Factory A asks RM95,000 per month.

Factory B asks RM100,000.

At first glance, Factory A appears cheaper.

But what if the SST treatment differs because of the respective landlord’s registration position or the particular tenant qualifies for an available exemption?

What about maintenance charges?

Security?

Assessment?

Insurance?

Machinery infrastructure?

Electricity capacity?

Fit-out costs?

The correct comparison is therefore not simply:

RM95,000 versus RM100,000.

A sophisticated tenant should calculate:

Total Occupancy Cost.

This is particularly important in industrial property because rental represents only one component of operating a factory.

Existing Tenancy Agreements Deserve Another Look

Commercial landlords should also review existing agreements carefully.

Many tenancy agreements were negotiated before rental services entered the expanded SST framework.

Some contracts say:

Rental is RM50,000 per month inclusive of all taxes.

Others state:

All applicable taxes shall be borne by the tenant.

Some agreements say nothing at all about future indirect taxes.

Those wordings can produce very different commercial consequences.

Property owners should therefore avoid assuming that the economic burden can automatically be passed to the tenant without first examining the tenancy agreement and applicable law.

Likewise, tenants negotiating renewals should ask whether the quoted rent is:

exclusive of SST or inclusive of SST.

One sentence in the Letter of Offer can prevent an argument later.

Property Investors Should Reconsider How They Calculate Yield

Suppose an investor buys a factory for RM15 million producing RM75,000 monthly rent.

Annual gross rental: RM900,000.

Gross yield: RM900,000 ÷ RM15,000,000 = 6%.

But that 6% is not the investor’s net return.

The investor still needs to consider assessment, quit rent, insurance, repairs, vacancy, financing, management expenses, and applicable tax treatment.

SST creates another reason to distinguish between:

headline rental and actual investment return.

For commercial property valuation and acquisition decisions, gross yield should therefore be the beginning of the analysis, not the end.

The Bigger Lesson for Malaysia’s Rental Market

The Government’s 2026 reduction of rental and leasing Service Tax from 8% to 6%, together with expanded MSME relief, reduces some of the cost pressure created when rental services were first brought into the expanded SST regime.

But the new framework also makes commercial property transactions more technical.

Landlords now need to understand their registration position.

Tenants need to establish whether they qualify for relief.

Property agents and negotiators need to know whether rental quotations are SST-inclusive or SST-exclusive.

Investors need to calculate the true rental yield.

And lawyers drafting tenancy agreements need to allocate tax obligations clearly.

The key question in a commercial tenancy is therefore no longer simply:

“What is the monthly rental?”

The better question is:

“After SST, exemptions, operating expenses, and contractual obligations are taken into account, what is the real cost to the tenant — and what is the real return to the landlord?”

That is the number that ultimately matters.

For current requirements, refer directly to the Ministry of Finance’s 5 January 2026 SST policy update and the Royal Malaysian Customs Department’s Rental or Leasing Services Guide, Version 2, updated to 14 May 2026. Customs’ current MySST portal confirms that the rental and leasing Service Tax rate is 6% from 1 January 2026.

Disclaimer: This article is for general sharing of legal and real estate knowledge and experience only and does not constitute legal advice or recommendations.