Topic: SST | Leasing Services
Leasing services in Malaysia are generally included in Group K together with rental services. The current service tax rate is 6% from 1 January 2026, and a provider generally must register when taxable rental or leasing services exceed RM500,000 in a 12-month period.
This guide focuses on equipment, machinery, vehicle and other asset leases. The legal substance of the agreement matters: an operating lease can be taxable, while a qualifying financial lease or hire-purchase arrangement that transfers ownership at the end may be excluded from Group K.
Malaysia leasing service tax at a glance
| Question | Current position |
|---|---|
| Current rate | 6% from 1 January 2026 |
| Previous rate | 8% from 1 July to 31 December 2025 |
| Registration threshold | More than RM500,000 of taxable rental or leasing services in 12 months |
| Official category | Group K — Rental or Leasing |
| Key classification issue | Whether ownership transfers at the end of the arrangement |
Which leasing arrangements are generally taxable?
Group K covers the leasing of tangible assets and services that form part of the lease. Common examples include:
- operating leases of machinery and production equipment;
- vehicle leasing where ownership remains with the lessor;
- office equipment, printers and computer hardware leases;
- leases of movable plant and tools; and
- maintenance or support bundled into the lease consideration.
A lessor should review the entire agreement, including renewal clauses, purchase options, residual value, maintenance charges and the location of the asset.
Operating lease, financial lease and hire purchase
| Arrangement | General SST indication |
|---|---|
| Operating lease | Generally within Group K where the lessor retains ownership and provides the right to use a tangible asset. |
| Financial lease with ownership transfer | May be excluded from Group K where ownership transfers to the lessee at the end of the lease term. |
| Hire purchase with ownership transfer | May be excluded where the arrangement results in ownership transferring at the end. |
| Lease with purchase option | Requires review of the option and the commercial substance; an option is not automatically the same as a transfer of ownership. |
Accounting labels alone do not decide the service tax position. The signed agreement and actual transfer of rights should support the treatment.
What is excluded from Group K?
The regulations exclude specified arrangements, including leases of reading materials, tangible assets located outside Malaysia, and housing accommodation. A qualifying financial lease or hire-purchase arrangement with ownership transfer may also fall outside the rental or leasing service category.
Late-payment penalties stated separately from the leasing service are not consideration for a taxable service under RMCD’s published FAQ. Bundled maintenance, insurance or other charges should still be reviewed to determine whether they form part of the lease or are separate supplies.
Current leasing exemptions and reliefs
RMCD’s Service Tax Policy No. 2/2025 (Amendment No. 5), dated 22 July 2026, applies to both rental and leasing services. Key reliefs include:
- Federal and State Government exemption;
- eligible MSME lessee exemption through MyPMK, subject to the sales bands and conditions in the policy;
- a one-year exemption for qualifying newly established MSMEs from their SSM or equivalent registration date;
- qualifying same-group leasing relief; and
- specified aircraft and sea-vessel leasing exemptions.
The temporary non-reviewable contract relief ended on 30 June 2026. Lessors should ensure invoices for periods from 1 July 2026 do not continue that expired treatment.
Leasing SST checklist for lessors
- List every lease by asset type, asset location and customer.
- Identify whether ownership remains with the lessor or transfers at the end.
- Test the combined rental and leasing value against the RM500,000 threshold.
- Separate lease consideration, deposits, penalties and bundled services.
- Validate MyPMK or group-relief evidence before treating a lease as exempt.
- Apply 6% to taxable lease periods from 1 January 2026.
- Retain contracts, invoices and exemption documents for seven years.
Leasing SST checklist for lessees
A lessee should confirm the lessor’s SST registration, verify the service period and rate, and check whether the agreement is an operating lease, financial lease or hire purchase. Eligible MSMEs should complete their MyPMK declaration before relying on an exemption.
Related SST guidance
For commercial premises and recurring rental arrangements, read HTL’s Malaysia Rental Service Tax Guide 2026. For rates, registration, returns and payment, see the Malaysia Service Tax Guide 2026.
HTL can assist with SST registration and compliance, agreement reviews, exemption documentation and return preparation.
Official references
- RMCD Guide on Rental or Leasing Services
- Service Tax Policy No. 2/2025 (Amendment No. 5)
- Service Tax (Rate of Tax) (Amendment) Order 2026
- RMCD FAQ: Expansion of Service Tax Scope 2025
This article provides general information and is not a substitute for advice based on a specific lease or transaction.
Latest official policy: 22 July 2026
HTL last updated: 1 August 2026
