Malaysian retailers urge MOF to waive or defer SST on commercial rentals

• "Defer the SST on rentals until after Visit Malaysia Year 2026 to preserve industry stability and support tourism-linked growth." 

KUALA LUMPUR (June 17): The Malaysia Retailers Association (MRA) is urging the Ministry of Finance to waive the planned 8% sales and service tax (SST) on commercial rental and leasing services, warning it will further strain retail businesses and ultimately impact consumers through increased inflation.

In a statement on Monday (June 16), the association said the 8% SST on commercial rentals that will kick in on July 1 — introduced without any consultation or engagement with the retail sector — will add further pressure on the retail industry. 

“Rental is among the largest fixed costs for many businesses and this tax will push operating expenses even higher,” said MRA.

It said retail businesses nationwide are already facing immense pressure from a series of escalating costs, including the minimum wage increase to RM1,700, electricity tariff hikes, stamp duty on employment contracts, fuel subsidy rationalisation and the 10% sales tax on low-value imported goods.

"These are just a few examples of rising fixed operational costs. The full scope of burdens faced by retail businesses is much broader, but even these alone are already impacting business sustainability and bottom lines," the MRA said.

"It is unrealistic to expect retail businesses to absorb the full impact and many may have no choice but to pass these costs on to consumers — contributing to inflation and intensifying the rakyat’s cost-of-living burden," it stressed.

Compounding these challenges is the growing uncertainty in the global economy, it highlighted, especially in light of the recent escalation in geopolitical tensions between Iran and Israel. "This conflict has already begun affecting regional confidence, global commodity prices and trade flows — making it an especially inappropriate time to introduce new tax burdens," it said.

If a waiver cannot be granted, MRA suggested that the government postpone the implementation of the expanded SST until macroeconomic and geopolitical conditions stabilise. "Defer the SST on rentals until after Visit Malaysia Year 2026 to preserve industry stability and support tourism-linked growth," it said.

If implemented, the SST should be shared fairly between landlords and tenants, rather than passed entirely to retail businesses. Service charges and shared area fees should be excluded from the SST scope, it proposed.

And introduce the new tax gradually, starting at 3%, then increase it progressively to 8% over five years, it suggested.

It also recommended that the SST exemption threshold be raised to RM2 million in annual sales to safeguard small and independent retail businesses. 

“Retail businesses play a vital role in domestic economic growth and employment. It is critical that policies impacting this sector are implemented with transparency, fairness and proper stakeholder engagement,” MRA said, adding it welcomes further discussion with the Ministry of Finance to find a balanced and sustainable approach that supports both businesses and consumers.

The expanded SST measures, which were first announced in Budget 2025, are aimed at broadening the country’s tax base and increasing revenue without burdening the wider public, according to the government.

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