Guide to SST Taxability and Rates in Malaysia

What is Taxable Under Malaysia's SST?

Malaysia's SST is a single-stage tax system. It is not a VAT, which means there is no input tax credit or tax recovery mechanism. Once SST is charged, it becomes a final cost to the buyer.

Is SaaS taxable in Malaysia?

Yes. SaaS and digital services are taxable under Malaysia's Service Tax on Digital Services (SToDS) framework. This applies to both B2B and B2C customers located in Malaysia, regardless of where the seller is based.

Malaysia is one of the few countries in the world where the digital services tax applies to both individual consumers and registered businesses, making its scope notably broad.

Standard tax rates:

What qualifies as a "digital service" in Malaysia?

A digital service is any service that meets all three of the following conditions:

• It is delivered through information technology or an electronic network.

• It cannot be delivered without internet technology.

• Delivery to the customer is essentially automated (minimal or no human intervention from the service provider).

Common examples that qualify as digital services include:

• Software, applications, and video games (downloads, mobile apps, online gaming)

• Music, e-books, and video streaming (including subscription-based media)

• Online advertising and platform services

• Search engines and social networks

• Database and cloud hosting services (website hosting, cloud storage, file sharing)

• Internet-based telecommunications (VoIP, Cloud-PABX)

• Online training and e-learning (pre-recorded courses, webinars, distance learning)

Exported services (out of Malaysia)

If your business is based in Malaysia and provides services to a customer located outside Malaysia, those services are generally not subject to service tax, provided the applicable conditions are met. The destination country's tax rules may apply instead.

Exempt supplies

There is no "zero-rated" category under Malaysia's SST. Supplies are either taxable or exempt. Exempt supplies do not count toward the SST registration threshold.

No input tax credit

Unlike VAT systems, Malaysia's SST does not allow businesses to recover or deduct the service tax paid on their own purchases. The tax is a one-time, final cost at each stage.

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