SST 2% Rental Tax Exemption Malaysia: Invoice & SST-02 Guide (2026)

The Royal Customs Department (RMCD) of Malaysia introduced updated guidelines on the 2% service tax exemption for rental or leasing services, effective 1 January 2026. This change affects how businesses issue invoices and report taxable services in the SST-02 return form, including submission frequency, deadlines, and key compliance requirements.

What is the 2% Service Tax Exemption on Rental Services?

Under the revised policy, the government applies a new structure for rental or leasing services. Previously, these services carried an 8% service tax, but businesses now charge 6%, while the remaining 2% qualifies as an exemption.

This means:

• • Business calculate service tax based on the full taxable amount
  • Businesses only pay 6% service tax
  • Business must still declare the exempted 2% in SST-02 reporting

Invoice Issuing Methods for Rental Services

Businesses issue invoices using two approved formats:

1. Charge 8% with 2% shown as exemption

• • Businesses show the full 8% service tax on the invoice
  • This display the 2% exemption as a separate adjustment (negative or deduction line)

2. Charge 6% with exemption note

• • Businesses charge only 6% service tax
  • This include a note stating that RMCD exempts the remaining 2%

Both methods comply with RMCD requirements as long as businesses clearly show the 2% exemption on the invoice.

SST-02 Declaration Requirements

For SST-registered businesses, reporting must be done carefully in the SST-02 form.

Key reporting rules:

• • Report the full service value under taxable services
  • Declare the service under 6% tax rate category
  • Declare the exempted 2% value in Item 18(c)(3) (Other Exemptions)

Example:

If rental service = RM1,000:

• • RM1,000 → Taxable service value
  • RM1,000 → Reported under 6% taxable services
  • RM1,000 → Declared under exempted services (2%)

System and Software Considerations

Many accounting and ERP systems (such as SST-enabled modules) now support:

• • Automatic 6% tax calculation
  • Automatic 2% exemption tracking
  • SST-02 form mapping (Item 18(c)(3))

Businesses are encouraged to update their systems to the latest version to ensure compliance.

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