TODAY is set to be a crucial date in the Malaysian tax scene. To facilitate compliance, here is a recap of the changes that take will take effect.
• Businesses with annual turnover of RM25 million to RM100 million are required to be in full compliance with e-invoicing requirements. Until June 30, 2025, businesses of the said size were allowed flexibilities to issue consolidated e-invoice on sales transactions as well as consolidated self-billed e-invoice on importation of goods and services. These flexibilities would cease to exist for transactions from July 1, 2025 onwards.
• Businesses with annual turnover of RM5 million to RM25 million are required to implement e-invoice, but flexibilities are available for the first 6 months, i.e. until Dec 31, 2025.
• Statutory bodies, statutory authorities and local authorities are required to issue e-invoice from July 1, 2025. Even after this date, there is an exception that expressly preclude requirement to issue e-Invoice in respect of collection of payment, fee, charge, statutory levy, summon, compound and penalty by the said bodies/authorities carrying out functions assigned to it under any written law.
• Widening of scope of service tax to include education, higher education (for non-citizen), healthcare (for non-citizen), construction works, financial services, beauty & personal care services, as well as rental and leasing of movable and immovable properties. Service providers who are presently registered for service tax would charge 6% or 8% on these transactions from July 1, 2025 onwards.
• Widening of scope of sales tax to include goods from over 3,000 HS Codes. This affects various products that belongs to HS Code chapters of plastics, rubber, wood, iron and steel, copper, nickel, aluminium, machinery, mechanical appliances etc., which were previously under the sales tax exemption order. Manufacturers who are presently sales tax registered are required to impose sales tax on these newly taxable goods starting from 1st July 2025.
• Importation of various taxable goods are subject to sales tax from July 1, 2025. The newly taxable goods include the examples in the preceding point as well as fresh food items such fruits and seafoods.
• Malaysian businesses that pay to foreign vendors in respect of the newly taxable services are required to self-account for a 6% or 8% service tax under the reverse charge mechanism. This requirements is independent of withholding tax requirements and applies from July 1, 2025 regardless of whether the Malaysian customer is a service tax registered person or not.
Next ‘big date’ is Sept 1, 2025
• For service providers who are presently not service tax registered but provide services which are newly gazetted as a taxable service, an application for service tax registration must be submitted in August 2025 if the value of taxable service exceeds the registration threshold. Consequentially, the service provider shall impose service tax at a rate of either 6% or 8% on the value of taxable services effective from Sept 1, 2025.
• For manufacturers who are presently not sales tax registered but sell goods which are no longer listed in the Ministerial Order on goods exempted from sales tax, an application for sales tax registration must be submitted in August 2025 if the value of taxable goods exceeds the registration threshold of RM500,000. Consequentially, the manufacturer shall impose sales tax at a rate of either 5% or 10% on the value of taxable goods effective from 1st September 2025.
To-do before the year end
Here are opportunities to bridge compliance gaps without penalty before we wrap up this year:
1. Employment agreements entered into during calendar year 2025 are to be stamped by Dec 31, 2025 without any late stamping penalty.
2. A comprehensive compliance review on agreements or contracts (inclusive of risk assessment) in view of the implementation of self-assessment for Stamp Duty effective January 1, 2026. There may be merits to close any compliance gap or risk areas by Dec 31, 2025 before self-assessment provisions in the Stamp Act takes legal effect.
3. In relation to SST expansion, businesses are granted grace period up to Dec 31, 2025 to make good any compliance gap without penalty. The tax, however, must be paid and it would be a cost to the vendor if the same cannot be recovered from the customer.
New year, new beginnings
Here are key tax changes that effect from Jan 1, 2026:
1. Consolidated e-invoice is not permitted for any single transaction with a value exceeding RM10,000. This means, if an individual buys, say, a luxury watch costing more than RM10,000, he or she would be required to provide their NRIC number or TIN to the vendor as a mandatory to complete the transaction.
2. Businesses with annual turnover of more than RM5 million to RM25 million are required to be in full compliance with e-invoicing requirements (flexibility ends on Dec 31, 2025).
3. Businesses with annual turnover of RM1 million to RM5 million are required to implement e-invoice, but flexibilities are available for the first 6 months – i.e. until June 1, 2026.
4. The first phase of implementation of self-assessment system for stamp duty, thus requiring businesses to independently evaluate the stamp duty payable on their agreements / instruments executed from this date onwards.
Of course, the above is only based on changes legislation as of now. There could be more tax measures that take effect from 1st January 2026 as part of the 2026 Budget which is planned to be tabled in the parliament during the month October 2025.
Concluding thoughts
Gone the days businesses refer to a simple tax calendar each year filled with tax filing deadlines. The multiple tax measures rolled out recently to fine-tune the nation’s tax system means that businesses must be more diligent in managing the tax affairs and meeting the due dates. While ensuring compliance is important, businesses must also perform holistic tax impact assessment with an aspiration to maintain competitiveness by optimising exemptions and embracing technology.
Businesses should recognise the highly technical nature of some of the recent tax measures and seek professional input from professionals who are duly licensed, qualified and experienced to avoid unintended non-compliance.
This article is contributed by Vivekanandan Vasudevan (pic) is Corporate & International Tax Manager at TRATAX Sdn Bhd, consulting firm specialised in tax, transfer pricing & SST.
