Quick answer

Service tax on rental or leasing of tangible assets was expanded from 1 July 2025, and it applies mainly to commercial and industrial leasing above the registration threshold, not to ordinary residential tenancy between individuals. The rate on rental or leasing services was reduced from 8% to 6%, effective 1 January 2026.

If you are an individual renting out a residential unit, you are generally outside this SST registration unless your letting operates at a scale or structure that crosses the threshold. This is a separate tax from the income tax you already declare on rental income, and it deserves its own check with RMCD if you are unsure where you stand.

"Rental tax" is a headline that oversells what changed

A "service tax now covers rental" headline sounds like it touches every landlord in the country. It does not. The expansion that took effect on 1 July 2025 brought rental and leasing of tangible assets into the service tax net, but the people it was actually written for are businesses leasing commercial and industrial assets, machinery, equipment and similar tangible property above the prescribed registration threshold, not an individual renting out a unit to a tenant.

Most individual residential landlords are simply not the audience this rule targets.

The rate moved down in 2026, which matters if you are registered

If your leasing activity does fall inside SST registration, the rate that applies to rental or leasing services dropped from 8% to 6%, effective 1 January 2026. That is a reduction, not a new charge, for businesses already inside the regime. If you were already charging or absorbing 8% on a leasing arrangement, the effective 2026 rate is lower.

This is not the same tax as the one on your rental income

It is worth being precise here because two different tax regimes get mixed up in casual conversation. Rental income you earn as an individual landlord is assessed under income tax, generally as non-business income, and you declare it to LHDN separately from any SST question. SST on rental or leasing is an indirect tax on the leasing service itself, administered by RMCD (Customs), and it is a different mechanism with a different registration test.

An individual renting out one or two residential units to tenants is not automatically inside either the commercial-leasing SST net or a business-income classification. Confirm your own income-tax treatment separately from your SST exposure; do not assume clearing one question answers the other.

What to actually check if you are unsure

The registration threshold and the exact scope of "commercial and industrial leasing" are set by RMCD's policy documents, and the practical test depends on the nature and scale of your leasing activity, not a single number every reader can apply to themselves. If your letting arrangement looks more like a business operation than an individual renting out a spare unit, that is the point to confirm your specific status directly with RMCD rather than assume the ordinary-tenancy exemption still covers you.

Questions about SST on rental and leasing

Does this SST apply to me if I rent out my condo to a tenant?

Generally no. Ordinary residential tenancy between individuals sits outside this SST expansion, which was written for commercial and industrial leasing above the registration threshold.

What actually changed on 1 July 2025?

Service tax on rental or leasing of tangible assets was expanded to bring commercial and industrial leasing arrangements above the registration threshold into scope.

What changed on 1 January 2026?

The rate applying to rental or leasing services was reduced from 8% to 6% for arrangements already registered under this SST.

Is this the same as the income tax I already pay on my rental income?

No. Income tax on rental income is a separate regime assessed by LHDN. SST on rental or leasing is an indirect tax administered by RMCD on the leasing service itself. Being outside one does not automatically mean you are outside the other, and being inside one does not mean you are inside the other.

How do I know if my letting arrangement crosses into SST territory?

The registration threshold and the scope of commercial and industrial leasing are set out in RMCD's policy documents, and the answer depends on the nature and scale of your specific arrangement. Confirm directly with RMCD if your letting looks more like a business operation than an individual tenancy.

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Sources and verification notes

This article was prepared from the official pages below with an initial fact cutoff of 12 September 2026. Registration thresholds, scope and rates can change; recheck the current source before acting. This is general financial education, not personalised tax advice.

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