AdrianYeo Tax KL - The Business Ledger , SSTAdrianYeo Tax KL - The Business Ledger , SSThttps://www.adrianyeotaxkl.my/the-business-ledger/sstFri, 10 Apr 2026 13:40:29 -0700http://zoho.com/sites/<![CDATA[Service Tax Exemption for Non-Reviewable Construction Contracts (Effective 1 July 2025 – 30 June 2026)]]>https://www.adrianyeotaxkl.my/the-business-ledger/post/service-tax-exemption-for-non-reviewable-construction-contracts-effective-1-july-2025-–-30-june-2026The 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.]]>

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.

Get free consultation
]]>Tue, 28 Oct 2025 10:17:50 +0000<![CDATA[Construction Services SST Exemption 2025]]>https://www.adrianyeotaxkl.my/the-business-ledger/post/official-announcement-construction-services-sst-exemption-2025The Royal Malaysian Customs Department has issued Service Tax Policy No. 3/2025 , outlining the Service Tax Exemption for Construction Services , effective 1 July 2025. Here are the key highlights:]]>

Official Announcement:

The Royal Malaysian Customs Department has issued Service Tax Policy No. 3/2025 , outlining the Service Tax Exemption for Construction Services , effective 1 July 2025 .


Here are the key highlights:

Exemption for Government

Federal and State Governments are fully exempted from service tax.

Exemption for Local Authorities (PBT)
  • Service tax exemption: 1 July 2025 – 30 September 2025
  • Service tax applies from 1 October 2025 onward
    • Penalty Exemption until 31 December 2025
  • Late registration
  • Late return submission
  • Late payment
  • Errors in declaration or invoicing
    • Exemption for Fixed Contracts (Non-reviewable Contracts)

      Applies from 1 July 2025 – 30 June 2026 , subject to:

      • Contract signed and stamped by LHDN on or before 9 June 2025
      • Fixed price with no adjustment clause
      • Contract specifies service type and duration
      • Contract remains valid beyond 1 July 2025

      ⚠️ Exemption does not apply to cases involving fraud or deliberate offenses.


      Important Reminder:

    • All exemptions are conditional . Non-compliance may result in tax recovery and penalties .
    • Although effective 1 July 2025 , construction services will be subject to 6% Service Tax (SST) . However, not all projects are taxable — incorrect application could lead to overcharging clients or underreporting tax liabilities .


      • Here are the key scenarios you must be aware of:

      1 Project completed before 1 July Exempted
       2 Services performed after 1 July Fully taxable (if invoice issued & payment made after 1 July)
       3 Services performed after 1 July Exempted (If invoice issued & payment made before 1 July)
       4 Projects that straddle 1 July must be apportioned and taxed accordingly
       5 Services performed after 1 July, invoices issued before 1 July but payment received after 1 July

      attract SST 

      6  Retention sum exempted of project handed over before 1 July
      7  Retention sums taxable even if unbilled beyond 12 months after project handover

      Why This Matters:
      Correctly determining your tax exposure ensures compliance, prevents disputes with clients, and protects your business cash flow.


      Quick Reference Guide
      For your convenience, we’ve created a clear, visual summary of these updates.
      Download our easy-to-read infographic for a snapshot of these updates

      Download here

      Stay ahead of these changes and safeguard your business from unnecessary risks.

      Get a complimentary 45-Minute Consultation
      Our tax specialists are offering a free one-on-one consultation to review your SST concerns on your industry, answer your questions, and help you apply SST rules correctly.

      Book a free 45-mins consultation
      ]]>      Wed, 08 Oct 2025 12:56:24 +0000