Malaysia’s revised Sales and Service Tax (SST), effective 1 July 2025, has introduced critical changes that directly impact service providers, online merchants, and payment gateway Malaysia providers. With digital services becoming more integral to business operations, these tax updates have real implications for how gateway fees are structured, disclosed, and taxed.
What’s Changed in the 2025 SST Amendments?
Here are the most notable updates:
- Widened scope of taxable services, including more digital and fintech-related services.
- Revised service tax rate from 6% to 8% on selected services.
- Clarified treatment of merchant discount rates (MDRs) and transaction-based fees.
This is part of Malaysia’s broader tax reform to modernise fiscal policy, improve revenue collection, and ensure digital economy players are appropriately contributing.
How Are Payment Gateways Affected?
Payment gateways are classified under “intermediary services” in SST law. Under the new amendments:
- Service tax must be charged on MDRs, setup fees, integration services, and subscription-based tools.
- Fees shown to merchants (especially SMEs) must now clearly separate SST charges to ensure transparency.
- Gateways must adjust invoice structures and API outputs to align with MyInvois (e-invoicing) and SST reporting standards.
This means all transaction-based charges and value-added services will need to be properly accounted for within invoicing frameworks.
Impacts on Merchants Using Payment Gateways
Area of Impact | New Implication |
Merchant Discount Rates | May rise by 2% due to SST pass-through |
Monthly Service Fees | SST must be itemised on all invoices |
Annual Software Licences | Subject to 8% SST if delivered digitally |
As a result, merchants need to be more proactive in monitoring total cost of ownership (TCO) when subscribing to gateway platforms or processing high volumes of transactions.
Examples of Services Now Taxable Under SST (2025)
- API subscription fees for analytics or fraud detection
- Cloud-based POS integration packages
- White-label checkout plugins
- Merchant onboarding and KYC verification services
- Recurring SaaS billing modules
This means even small digital features or bundled solutions previously untaxed may now carry an SST tag.
How Gateways Like Paydibs Can Stay Compliant
- Automated SST Calculation: Payment gateways must build internal SST calculators that can apply correct tax logic in real time.
- SST-Inclusive Receipts: Gateways must offer clear SST breakdowns on merchant dashboards and invoices.
- MyInvois API Integration: Real-time validation of SST-related invoices via LHDN’s e-invoicing ecosystem is now required.
These actions not only reduce audit risks but also improve business trust and credibility.
Practical Advice for SMEs and Online Merchants
- Review All Fee Structures: Know what services you are paying SST for.
- Negotiate Transparent Pricing: Insist on upfront SST visibility from your provider.
- Update Accounting Software: Sync accounting systems to match SST invoice output from your gateway.
- Budget for SST Impact: Expect a possible increase in total processing fees.
- Monitor Invoice Templates: Ensure invoices meet MyInvois and SST compliance requirements.
Conclusion: SST Is No Longer Just a “Back-Office” Concern
The July 2025 SST update makes tax compliance an operational priority for all digital service users—including merchants using Paydibs and other payment platforms. What was once managed by accounting departments must now be embedded into your billing, checkout, and client-facing workflows.
Failing to comply may lead to:
- Hefty fines
- Withheld tax refunds
- Delays in financial audits
Proactive compliance isn’t just about avoiding penalties—it’s a strategic advantage. Merchants and gateways that adapt early to the new SST and e-invoicing norms will be better positioned for scalable, trustworthy growth.
Frequently Asked Questions
1. What is the new SST rate in 2025?
It’s now 8% for selected taxable services, up from 6% previously.
2. Are all payment gateway services now subject to SST?
Yes, most services such as MDRs, integration, and SaaS are taxable under intermediary services.
3. Can I absorb SST fees instead of passing them to customers?
Yes, but it must be clearly stated. Most businesses pass it on to remain profitable
4. Will SST apply to international transactions?
Yes, if the service is consumed in Malaysia—even if billed offshore.
5. Do I need to itemise SST on every invoice?
Yes, invoices must show SST separately and follow e-invoicing requirements.
6. What happens if I don’t comply with the new SST rules?
You may face audits, fines, and rejection of invoices for tax purposes.
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