The Royal Malaysian Customs Department (RMCD) has issued an update under Service Tax Policy No. 3/2025 (Amendment No. 1) on 17 October 2025, providing Service Tax Exemption for specific construction works services performed under qualifying Non-Reviewable Contracts.
This exemption applies from 1 July 2025 to 30 June 2026.
⚠️ Please note: Construction services provided on or after 1 July 2026 will again be subject to service tax.
Key Requirements for Service Tax Exemption
To qualify for the exemption, all conditions below must be met:
1. Contract Rigidity & Duration
The contract must not include:
Any price review clauses; or
Any value adjustment mechanisms.
The contract must clearly specify:
The type of service,
A fixed contract value, and
The contract duration.
The contract must remain valid after 1 July 2025.
3. Contract Execution & Deadlines (Updated)
The contract must be:
In writing, and
Signed before 1 July 2025 (Previously: On or before 9 June 2025)
Stamped with duty by LHDN before 31 December 2025 (Previously: On or before 9 June 2025)
2. Service Provider Registration
The contractor must be registered for service tax
4. Amendments – Variation Orders (VO) & Extensions of Time (EOT)
The exemption may still apply if the contract is amended without altering key terms, as detailed below:
• Variation Orders (VO):
The total contract value must remain unchanged.
The VO must be:
Signed before 1 July 2025, and
Stamped by LHDN before 31 December 2025.
• Extensions of Time (EOT):
The extension must relate to the original contract that:
Meets all Conditions 1–3 above,
Has a fixed value, and
Expires before 1 July 2025.
The EOT must be:
Signed before 1 July 2025, and
Stamped by LHDN before 31 December 2025
📌 Summary
If your ongoing or upcoming construction projects fall under a Non-Reviewable Contract that meets all the above requirements, they will qualify for service tax exemption between 1 July 2025 and 30 June 2026.
We recommend reviewing your current and future contracts to ensure compliance and to benefit from this exemption.
**For more information, please refer to the official Service Tax Policy No. 3/2025 (Amendment No. 1) issued by RMCD on 17 October 2025.
Need Clarification or Assistance?
Our tax advisory team is ready to help you review your construction contracts and assess your eligibility under this exemption.
Schedule a meeting with us today for guidance or further clarification on how this policy impacts your business.