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Rent for factories, warehouses and other non-residential property in Malaysia is subject to service tax of 6% from 1 January 2026 (it was 8% from 1 July to 31 December 2025). A landlord only has to charge it after registering, which is required when the landlord’s taxable rental income goes above RM1 million in 12 months. Small and medium tenants with annual sales of up to RM1.5 million can be exempt by declaring through the Customs MyPMK system.
Because Johor factory rents are high, many landlords cross the RM1 million line with a single building. This guide explains who pays, how to check whether your tenancy is taxable, and what to put in the tenancy agreement.
Key facts at a glance
| Item | Rule from 1 January 2026 |
|---|---|
| Rate | 6% of the rent (8% from 1 July to 31 December 2025) |
| What is taxed | Rental or leasing of non-residential property, including factories, warehouses, offices and shops |
| What is not taxed | Residential property, such as houses and apartments |
| Landlord must register when | Taxable rental income is more than RM1,000,000 in 12 months |
| Tenant exemption | SME tenants with annual sales up to RM1.5 million, declared through MyPMK; new SMEs exempt for one year from SSM registration |
Sources: the Royal Malaysian Customs Department MySST portal and the rental and leasing services guide summary by L & Co Accountants.
When does a factory landlord have to register?
The landlord counts only its rental income from taxable property over a 12-month period, not its other business sales. A manufacturer with RM10 million in sales that rents out one small unit for RM20,000 a month (RM240,000 a year) does not need to register. A company whose only business is owning factories counts the rent from all of its non-residential properties together.
At Johor rents of around RM2.50 to RM2.80 per sq ft a month, the RM1 million line is reached quickly:
| Factory size | Rent at RM2.70 psf | Rent per year | Over RM1 million? |
|---|---|---|---|
| 15,000 sq ft | RM40,500 / month | RM486,000 | No |
| 30,000 sq ft | RM81,000 / month | RM972,000 | Just under |
| 33,000 sq ft | RM89,100 / month | RM1,069,200 | Yes |
| 100,000 sq ft | RM270,000 / month | RM3,240,000 | Yes |
👉 A landlord with two or three mid-sized factories usually crosses the threshold too, because all taxable rent is added together.
Example: what the tenant pays
A 33,000 sq ft factory is rented at RM89,100 a month. The landlord is registered and the tenant does not qualify for the SME exemption. Service tax is 6% of RM89,100, which is RM5,346 a month, so the tenant pays RM94,446. Over a three-year tenancy, that is about RM192,000 of service tax.
Unlike GST in the past, service tax cannot be claimed back as an input credit. For the tenant it is a real cost, although it is deductible together with the rent as a business expense for income tax.
The SME tenant exemption
From 1 January 2026, a tenant that is a micro, small or medium enterprise with annual sales of up to RM1.5 million (raised from RM1 million) can rent without service tax, even from a registered landlord. Newly established SMEs are exempt for one year from their SSM registration date. To use the exemption, the tenant must make the declaration through the Customs MyPMK system and give the landlord proof.
Landlords should not accept a verbal statement that a tenant is an SME. If the exemption turns out to be wrong, Customs will look to the registered landlord for the tax.
What to put in the tenancy agreement
- State clearly that the rent is exclusive of service tax, and that the tenant pays any service tax charged at the current rate. Many older Johor tenancies do not mention SST at all.
- Add a clause for future rate changes, since the rate has already moved from 8% to 6% within six months.
- If the tenant claims the SME exemption, ask for the MyPMK confirmation before the tenancy starts and each year after.
- Check whether service charges, car park fees or equipment rented with the factory are also covered.
Stamp duty on the tenancy agreement
The tenancy agreement itself also needs stamp duty, charged on the annual rent. From 2025, the old RM2,400 exemption was removed, so the whole annual rent counts. The rates per RM250 of annual rent are:
| Tenancy period | Duty per RM250 of annual rent | Example: RM89,100 a month |
|---|---|---|
| 1 year or less | RM1 | RM4,277 |
| More than 1 year to 3 years | RM3 | RM12,831 |
| More than 3 years to 5 years | RM5 | RM21,385 |
| More than 5 years | RM7 | RM29,939 |
By custom the tenant pays the stamp duty, but this can be agreed differently. A tenancy of more than three years is treated as a lease and may need to be registered at the land office; ask your lawyer which applies to your term.
Frequently asked questions
Is rent for industrial land subject to service tax?
Rental of non-residential property is taxable, and this generally includes industrial land used for storage, yards or parking. If you rent out vacant land, check the treatment with your tax agent, especially for agricultural titles.
Do I charge service tax on rent from a related company?
Rent between companies in the same group is still rental income. Group relief rules exist for some services, so ask your tax agent whether they apply to your case before you invoice.
Does service tax apply to bonded warehouses in a free zone?
Free zone rules for goods and services are different and depend on where the service is provided and used. See our guide to bonded warehouses in Johor, and confirm the SST position with the warehouse operator.
Looking for space? Browse our factories for rent in Johor and warehouses for rent, or contact Jimmy Toh to discuss the rent and terms.
This article is general information, not legal or tax advice. Rates and rules change, so please confirm the details with your lawyer or tax agent before you sign.
