MOF Explainer on Service Tax Exemption for Aircraft and Ship Leasing

PETALING JAYA, Aug 17 — The finance ministry has clarified its decision to exempt aircraft and ship leasing from the 8% service tax on commercial rental and leasing services.

It said the move was aimed at preventing owners from registering aircraft and ships abroad, which could reduce Malaysia’s economic and tourism activity. The ministry noted that neighbouring countries do not impose similar taxes, and without the exemption, customers might seek leasing services overseas.

The ministry stressed the exemption applies only to the aviation and maritime sectors, not to vehicles, buses, or business premises.

Finance Ministry’s Guide on Service Tax Exemption

1. Exemption Granted
   • Leasing of aircraft and ships is exempted from the 8% service tax on commercial rental and leasing services (effective July 1).
2. Reasons for Exemption
   • To prevent owners from registering aircraft and ships abroad, which would reduce Malaysia’s economic and tourism activity.
   • Other neighbouring countries do not impose such taxes; without the exemption, customers may choose overseas leasing services.
3. Scope of Exemption
   • Applies specifically to the aviation and maritime industries, which are vital to supply chains, tourism, and the economy.
   • Does not apply to cars, buses, or business premises.
4. Transparency
   • Ministry denied the exemption was done discreetly; official notification was uploaded on the Customs Department’s MySST portal on July 24.
5. General Tax Rule
   • The 8% service tax applies to providers whose leasing income exceeds RM1 million.
   • Micro, small, and medium enterprises (annual sales below RM500,000) are exempted.