Service tax on commercial rent in Malaysia (6% from 2026): what shop and office owners and tenants need to know

中文 · Bahasa Melayu · Bahasa Indonesia

By Jason Lim, REN 84424 · IQI Realty · Checked on 14 November 2026

For owners and tenants of shops, offices and warehouses in Johor Bahru and the rest of Malaysia, the short answer: since 1 July 2025, rent for commercial property has been a taxable service. The rate was 8% for services from 1 July to 31 December 2025 and has been 6% since 1 January 2026. Only landlords whose rental and leasing income goes above RM1 million over 12 months must register and charge it. Homes rented as homes are outside the tax, and many small business tenants can claim an exemption.

What changed and when

The government widened service tax from 1 July 2025 and added rental and leasing services as a new group, Group K. After industry feedback, the registration threshold was raised from the RM500,000 first proposed to RM1 million before the start date. In January 2026 a lower rate and wider relief for small businesses followed.

Date	Change
June 2025	Ministry of Finance announces the wider service tax scope, including rental and leasing at 8%
27–28 June 2025	Registration threshold for rental and leasing raised from RM500,000 to RM1 million
1 July 2025	Service tax on rental and leasing starts at 8%
1 July 2025 to 30 June 2026	Exemption for existing contracts that could not be revised, subject to conditions (now ended)
5 January 2026	Rate cut to 6% and the MSME tenant threshold raised to RM1.5 million announced
1 January 2026	6% applies to services from this date, at first through a 2% exemption
13 March 2026	Service Tax (Rate of Tax) (Amendment) Order 2026, P.U.(A) 125/2026, sets the 6% rate in law
14 May 2026	Customs issues an updated guide on rental or leasing services, replacing the 9 June 2025 guide

The rate depends on when the service is provided, not when the tenancy was signed: rent for July to December 2025 was charged at 8%, and rent from January 2026 at 6%, even under the same agreement. I found no further change to rental service tax in coverage of Budget 2027 (tabled 9 October 2026), but check the MySST portal before you sign a new lease.

Which properties are taxed and which are not

Group K covers renting or leasing tangible assets located in Malaysia. For property, that means non-residential space: shops, offices, warehouses, factories and retail space in malls. Customs also treats retail display space and long land leases without transfer of ownership as rental.

Property and use	Service tax on the rent?
Shoplot, shop office or office rented to a business	Yes, if the landlord is above the RM1 million threshold
Warehouse or factory in an industrial area	Yes, same threshold
Terrace house, bungalow, flat, apartment, condominium or affordable home rented as a home	No, housing accommodation is excluded
SOHO unit lived in as a home	No, when used for residential purposes
SOFO unit used as an office	Yes, when used as office or administrative premises
Serviced apartment or serviced suite rented as a home	No, listed as housing accommodation in Customs material
Rent from the Federal or a State Government as landlord	Exempt
Rent between companies in the same group	Exempt under group relief, subject to conditions

The key point in the 2026 guide is that actual use decides, not only the product name or land title. A serviced apartment on commercial land rented to a family is still a home for this purpose, though it may carry other commercial-title costs. A SOFO used as a company office is commercial space. See also my condo vs landed vs SOHO guide.

Short-stay accommodation is a separate service tax category; see short-stay rules in JB.

For owners: do you need to register?

A landlord must register for service tax under Group K when the value of its taxable rental and leasing services goes above RM1 million in 12 months, or is expected to. RM1 million a year works out to about RM83,000 a month of commercial rent. Most individual owners in Johor Bahru with one shoplot in Mount Austin or a few office units in the city centre are far below this, so they do not register and do not add service tax to the rent.

The landlords who usually cross the line are companies owning malls, office towers, rows of shophouses or industrial estates. If you own several commercial properties, add up all the rent, and ask your tax adviser how Customs treats property held in different names or companies. Businesses already registered under another service group update their MySST record to add Group K instead of registering again.

What a registered landlord does

1. Register on the MySST portal by the end of the month after the threshold is reached or expected.
2. Charge 6% on the taxable rent on invoices in the format Customs requires.
3. Apply exemptions correctly, such as for MSME tenants, and keep the records.
4. Account for the tax generally when payment is received, or 12 months after the service if the tenant has not paid by then.
5. File the SST-02 return online for each taxable period and keep records for seven years.

What is part of the taxable rent

• Rent and charges bundled with it, including maintenance or repair services that come with the rent.
• Utilities: if the tenant pays the utility company directly, it is not part of the rent. If the landlord recovers utility costs from the tenant, by meter reading or apportionment, the full recovered amount is part of the taxable rental, even at cost (Customs guide, 14 May 2026).
• Refundable deposits are not taxable unless they are applied as payment for the rent.
• Late-payment charges on overdue rent are not treated as taxable rental.

Landlords also pay income tax on rent and may be in scope for e-invoicing; see rental income tax and e-invoicing for landlords. This is general information, not tax advice.

For tenants: what you pay and how to claim the MSME exemption

If your landlord is registered and no exemption applies, you pay 6% on top of the rent. Unlike the old GST, service tax has no input-tax credit, so for most tenants it is a real cost; tax experts quoted by The Edge Malaysia (October 2026) named leasing as an area where tax can build up along a supply chain.

Monthly rent	Service tax at 6%	Monthly total	Service tax over 12 months
RM3,000 (small shoplot)	RM180	RM3,180	RM2,160
RM6,000 (corner shop office)	RM360	RM6,360	RM4,320
RM15,000 (office floor)	RM900	RM15,900	RM10,800
RM40,000 (warehouse)	RM2,400	RM42,400	RM28,800

The MSME tenant exemption

Rent paid by micro, small and medium enterprises can be exempt. In January 2026 the annual sales limit rose to RM1.5 million, measured by the income declared to LHDN for the latest year of assessment (Customs, 23 January 2026).

• Register and declare your MSME status in MyPMK, the government’s MSME registration system. Firms registered in MyPMK by 31 December 2025 get the exemption from 1 July 2025; firms registering from 1 January 2026 get it from their MyPMK registration date.
• New businesses: from 1 January 2026, a newly set up MSME is exempt for one year from its SSM registration date. To keep the exemption after that year, it must file its income tax return and update its LHDN information in MyPMK.
• Business use only: the relief covers premises used for the business, not personal use.
• Tell your landlord and ask what confirmation it needs so it can bill you without the tax.

A tenant registered under Group K that sublets the space, such as a co-working operator, may qualify for a business-to-business exemption on the sublet part, subject to conditions. The head tenancy must allow subletting.

What to put in a commercial tenancy agreement

Before signing or renewing a lease for a shop or office in JB, check these points with your lawyer:

• Is the rent stated before tax? A common approach is a clause that any service tax is payable on top at the rate in force.
• What if the landlord registers later, or the rate changes? A clause should say who bears the tax if the landlord crosses the threshold mid-tenancy.
• Utilities: will the tenant open accounts in its own name, or will the landlord recharge? Recharged utilities are part of the taxable rent.
• Exemptions: how will the tenant show MSME status, and what happens if it stops qualifying?
• Invoices: the landlord should show service tax separately on each invoice.
• Stamping: commercial tenancy agreements are stamped on the rent like residential ones; see stamp duty on tenancy agreements.

For renewals, see rent increases and renewals; for company tenants, see corporate tenancies. My general tenancy agreement guide covers the other clauses. This is general information, not legal advice.

What it means if you are buying a shop or office

An individual investor with one or two shoplots in Johor Bahru is usually well below RM1 million a year, so service tax does not apply to the rent. It matters more when:

• You buy through a company that already owns other commercial property, so the combined rent may cross the threshold. See buying property through a company.
• You buy a tenanted unit and the existing lease has no tax clause. Read the agreement before you commit; see buying tenanted property.
• You plan to use the unit for your own business and rent from a large landlord in the meantime, where 6% is added unless you qualify for the MSME exemption.

Remember the other holding costs: quit rent and assessment, service charges and sinking fund for strata shops, and income tax on rent. If you trade commercial units often, read when property gains become business income.

Where to buy if this matters to you

• Mount Austin: busy shop-office streets with food and retail tenants.
• Tebrau, Setia Indah and Molek: established commercial strips near large housing areas.
• Bukit Indah and Gelang Patah: shop offices on the west side, towards the Second Link.
• JB Sentral and Bukit Chagar: city-centre offices near the CIQ and RTS Link station.
• Iskandar Puteri: newer commercial centres around Medini and Puteri Harbour.
• Kulai and Senai: warehouses and industrial space near the airport and highways.

Compare them on my JB property map.

More Johor living guides: E-invoicing for landlords · Rental income tax for resident landlords · Stamp duty on tenancy agreements · Running a business from a home in Johor

Frequently asked questions

Is there service tax on shop and office rent in Malaysia?

Yes. Since 1 July 2025, renting out shops, offices, warehouses and other non-residential space is a taxable service, but only landlords with more than RM1 million of rental and leasing income over 12 months must register and charge it.

Is service tax on commercial rent 8% or 6%?

It was 8% for services from 1 July to 31 December 2025. It has been 6% since 1 January 2026, set in law by P.U.(A) 125/2026, gazetted on 13 March 2026. The rate depends on when the service is provided.

Is residential rent subject to service tax?

No. Houses, flats, apartments, condominiums and serviced suites rented as homes are excluded as housing accommodation. A SOHO used as a home is not taxed, but a SOFO used as an office is, because actual use decides.

Does an individual who rents out one shoplot need to register?

Usually not. Registration is needed only when rental and leasing income goes above RM1 million in 12 months, which is about RM83,000 a month. Owners of several commercial properties should add up all their rent and check with a tax adviser.

Are small business tenants exempt from service tax on rent?

Micro, small and medium enterprises with annual sales up to RM1.5 million can be exempt after registering and declaring their status in MyPMK. Newly set up MSMEs are exempt for one year from their SSM registration date, from 1 January 2026.

Is a rental deposit subject to service tax?

A refundable deposit is not taxable unless it is used to pay the rent. Utility costs the landlord recharges to the tenant are part of the taxable rent, while bills the tenant pays directly to the utility company are not.

Buying, letting or renting commercial space in JB?

Tell me the type of space, the area and your budget or rent. I’ll help you shortlist shops, offices or warehouses and make sure the agreement deals clearly with service tax, utilities and stamping. You can also book an appointment, or a Zoom consultation if you are abroad.

Sources: Ministry of Finance, Expansion of the SST scope (rental and leasing at 8%, exclusions, B2B and group relief), June 2025; Ministry of Finance, Revision to the expanded sales tax and service tax (rental threshold raised to RM1 million), 28 June 2025; Bernama, “Service tax on rentals for MSMEs reduced to 6 pct”, 5 January 2026; The Star, “Service tax on rentals for MSMEs reduced to 6%”, 5 January 2026; Malay Mail, service tax on rentals for MSMEs reduced to 6pc, 5 January 2026; Royal Malaysian Customs Department, Service Tax Policy No. 2/2025 (Amendment No. 3), 23 January 2026 (MySST portal); Service Tax (Rate of Tax) (Amendment) Order 2026, P.U.(A) 125/2026, gazetted 13 March 2026; Royal Malaysian Customs Department, Guide on rental or leasing services, 14 May 2026, replacing the guide of 9 June 2025 (MySST portal); The Edge Malaysia, “Experts expect Putrajaya to sweat existing tax system”, 2 October 2026; Service Tax Act 2018 (Act 807)

Jason Lim, REN 84424, IQI Realty Sdn. Bhd. E (1) 1584/6. General information checked on 14 November 2026, not legal or tax advice. Service tax rates, thresholds and exemptions change; confirm with the Royal Malaysian Customs Department (MySST portal), your lawyer or a tax adviser before you sign a lease or issue an invoice.