SERVICE TAX POLICY NO. 3 / 2025 (AMENDMENT NO.1) EXEMPTION ON CONSTRUCTION WORKS SERVICES

The Royal Malaysian Customs Department has issued Service Tax Policy (STP) No. 3/2025 (Amendment No. 1) dated 17^th October 2025, providing important updates and exemptions under the Service Tax Act 2018 for construction works services (Group L, First Schedule, Service Tax Regulations 2018).

Effective 1^st July 2025, the following exemptions apply:

1. Federal Government and State Governments – Exempted from service tax on rental or leasing services.
2. Local Authorities (PBT) – Exemption on rental or leasing services from 1^st July to 30^th September 2025.
3. Non-Reviewable Contracts – Exemption for the period 1^st July 2025 to 30^th June 2026 (see Appendix A).
4. Construction of Residential Buildings and Public Facilities – Exemption for residential buildings within mixed developments (see Appendix B).
5. B2B Exemption for Design & Build Construction Contract – Applies to consultancy services under a single design-and-build contract (see Appendix C).
6. B2B Exemption Facility on Construction Work (1^st July – 31^st August 2025) – For newly registered construction service providers reaching the threshold in July 2025.

The amendment takes effect 1^st July 2025. It replaces the previous Service Tax Policy No. 3, which is now revoked.

Members are advised to:

1. Review current and upcoming contracts to confirm eligibility for exemptions.
2. Ensure contracts are signed and stamped before 1^st July 2025 where applicable.
3. Verify the service tax registration status of contractors and consultants involved in design-and-build projects.

For more detailed information, members may refer to the document click here;
Service Tax Policy No. 3/2025 (Amendment No. 1) issued by the Royal Malaysian Customs Department, dated 17^th October 2025.

Download MBAM Circular click here