Malaysia’s tax landscape in 2026 is undergoing significant changes following Budget 2026, the expansion of Sales and Service Tax (SST), and updates to the national e-invoicing rollout. Recent legislative developments, including the passing of the Finance Bill 2025, have formalised many of these measures and will directly impact businesses and individual taxpayers.
The key tax updates for 2026 include:
- Revised e-invoicing thresholds and rollout timeline
- SST expansion to more goods and services
- New 5% and 10% sales tax on discretionary and luxury items
- Expanded individual tax reliefs and stamp duty changes
- New compliance deadlines and grace periods for businesses
These changes affect SMEs, service providers, importers, investors, and high-income individuals across Malaysia.
1. What Are the New E-Invoicing Rules in Malaysia for 2026?
The Inland Revenue Board of Malaysia (LHDN) has introduced a revised implementation approach to ease the transition to mandatory e-invoicing.
Revised E-Invoicing Threshold and Timeline
Businesses with an annual turnover below RM1 million are now exempt from e-invoicing implementation. This represents an increase from the earlier proposed RM500,000 threshold and provides relief for smaller businesses.
Full e-invoicing implementation for all businesses with a turnover above RM1 million will take effect on 1 July 2026.
Interim Relaxation Period for SMEs
Taxpayers with annual turnover between RM1 million and RM5 million will be granted an interim relaxation period from 1 January to 30 June 2026 before full compliance becomes mandatory.
Mandatory Individual E-Invoices for Large Transactions
From 1 January 2026, individual e-invoices are required for transactions exceeding RM10,000. Consolidated e-invoices will no longer be allowed for transactions above this amount.
2. What Tax Changes Were Announced in Budget 2026?
The Budget 2026 announcement introduced several major tax measures that will affect upcoming tax years.
Key Budget 2026 Tax Measures
| Tax Category | Change |
| Dividend Tax | 2% tax on dividend income above RM100,000 (YA 2025/2026) |
| SST Expansion | Expanded scope to more goods and services (from 1 July 2025) |
| LLP Distribution Tax | 2% tax on LLP profit distributions above RM100,000 |
| Excise Duties | Higher duties on sugary drinks, cigarettes, and alcohol |
These measures signal a broader shift toward targeted taxation on higher-income earners and discretionary consumption.
Read our detailed breakdown of Budget 2026 tax changes in Malaysia.
3. What Is the New Sales Tax Rate in Malaysia for 2026?
Malaysia has revised its Sales Tax framework to focus on discretionary and premium goods while maintaining exemptions for essential items.
New 5% Sales Tax on Premium and Non-Essential Goods
A new 5% sales tax now applies to selected premium and imported goods, including:
- Premium seafood such as salmon, tuna, abalone, and king crab
- Imported fruits including avocados, grapes, mangoes, and durians
- Luxury food ingredients such as truffles and dried mushrooms
- Selected industrial goods and machinery including forklifts, cranes, iron, steel, and timber
New 10% Sales Tax on Luxury and High-End Items
A higher 10% sales tax applies to luxury and niche goods such as:
- Racing bicycles and collectible items
- Antique paintings and sculptures
- High-end watches and clocks
- Certain vessels and aircraft including cruise ships and helicopters
- Selected industrial waste and scrap materials
Sales Tax Exemptions Maintained for Essential Goods
To mitigate cost-of-living pressures, essential goods remain exempt from sales tax, including:
- Basic food staples such as rice, chicken, eggs, vegetables, flour and cooking oil
- Locally sourced fish and agricultural produce
- Selected imported fruits such as apples, oranges, mandarin oranges and dates
Check out our Complete Guide to 2025 Sales Tax Rate Transition
4. Which Services Are Now Subject to Service Tax?
The Service Tax scope has been expanded to include additional service categories, generally taxed at 6% to 8%.
Newly Taxable Service Categories
| Category | Service tax rate (%) | Description |
| Financial Services | 8% | Applies to fee-based services and commissions. The registration threshold has been raised to RM1 million, while basic banking services and Islamic finance remain exempt. |
| Rental & Leasing | 8% | Covers commercial property rentals and equipment leasing. Residential housing and MSMEs with annual sales below RM1 million are exempt. |
| Construction Services | 6% | Applies to building and road construction works, excluding residential buildings and related public infrastructure or facilities. |
| Private Healthcare & Education | 6% | Applicable only to non-citizens. For education, the tax applies to private schools where annual fees exceed RM60,000. |
| Beauty & Wellness | 8% | Basic services such as haircuts and facials are exempt. However, wellness centre services (e.g. aromatherapy, slimming treatments) are taxable if the business exceeds the RM500,000 threshold. |
5. What Individual Tax Relief and Stamp Duty Changes Were Introduced?
Budget 2026 also introduced expanded reliefs and administrative updates affecting individuals and businesses.
Expanded Individual Tax Reliefs
Medical expense relief now covers all NPRA-approved vaccines.
The RM3,000 childcare relief has been made permanent and expanded to include after-school transit centres.
A new lifestyle relief for home CCTV systems and food waste grinders has been introduced.
An RM1,000 domestic tourism relief has also been reinstated for Visit Malaysia Year 2026.
Stamp Duty Changes
Stamp duty for property transfers involving non-citizens or foreign companies is proposed to increase from 4% to 8% effective 1 January 2026.
The wage threshold for stamp duty exemption on employment contracts will increase to RM3,000.
Compliance Deadlines for Businesses
Businesses must apply for required tax registrations by 31 August 2025.
A penalty-free compliance grace period applies until 31 December 2025, with strict enforcement beginning 1 January 2026.
Who Should Pay Attention to Malaysia’s 2026 Tax Changes?
These tax updates affect:
- SMEs and companies above RM1 million turnover
- Service providers under newly taxable categories
- Importers and sellers of premium goods
- High-income dividend earners
- Property investors and foreign buyers
- Businesses subject to SST expansion
Stay A Step Ahead
Malaysia’s evolving tax framework reflects a shift toward broader consumption-based taxation and tighter compliance requirements. For organisations navigating these changes, we can help with proactive planning and professional tax guidance to manage risk, cost, and your business growth effectively in 2026.
