Since 1 July 2025, private healthcare services provided to non-Malaysian citizens have been subject to 6% service tax, and private education services attract 6% service tax where fees exceed RM60,000 per student per academic year — with tertiary institutions and language centres taxable on services to non-citizen students regardless of fee level. Malaysian citizens are exempt in both categories, which makes citizenship verification and fee structuring central compliance functions for hospitals and schools.

This article explains both regimes, the registration thresholds, the exemptions, and the 2026 developments — including the new taxability of health screening management services from 1 May 2026.

How does service tax apply to private healthcare?

From 1 July 2025, a 6% service tax applies to healthcare services provided by private healthcare facilities to non-Malaysian citizens. The scope covers private hospitals and clinics, and extends beyond conventional medicine to traditional and complementary medicine practitioners and allied health professionals.

The registration threshold is RM1.5 million of taxable healthcare services in a 12-month period. Two structural features define the regime:

1. The tax discriminates by patient, not by service. The same procedure performed on a Malaysian citizen is exempt; performed on a foreign national, it is taxable at 6%. Providers must therefore capture and verify citizenship at registration and billing, and their systems must apply tax at patient level.
2. Exempt revenue still counts toward the threshold. When measuring whether the RM1.5 million threshold is crossed, revenue from services to Malaysian citizens is generally still included. A hospital serving predominantly Malaysian patients can still be obliged to register because of its total service value, even though most of its billings carry no tax.

Services provided by government facilities and university hospitals fall outside the net.

The 2026 development: healthcare management services. Under Service Tax Policy No. 1/2026 (issued 4 May 2026) and RMCD’s Guide on Management Services (6 May 2026), providers of health screening management services must charge service tax from 1 May 2026. Third-party administrators, screening package operators and corporate health programme managers who assumed they were outside the healthcare rules should urgently review their position — management services are a distinct taxable category with its own treatment.

What does this mean for medical tourism?

Malaysia’s medical tourism sector bills foreign patients by design, so the 6% applies to substantially its whole revenue base. The practical questions we advise on are contractual and operational: whether packages sold through overseas facilitators state prices inclusive or exclusive of Malaysian service tax; how deposits and pre-payments taken before treatment are treated; and how refunds for cancelled procedures interact with tax already accounted for. Facilities should also ensure facilitator agreements deal expressly with who bears the tax, because a silent agreement leaves the facility exposed.

How does service tax apply to private education?

From 1 July 2025, private education services attract 6% service tax under three limbs:

1. Pre-tertiary education (private preschools, primary and secondary schools, including international schools) — taxable where fees exceed RM60,000 per student per academic year. Below that figure, no tax applies.
2. Tertiary education — taxable when provided to non-citizen students, with no fee threshold.
3. Language centres — taxable when provided to non-citizen students, again with no fee threshold.

For the tertiary and language-centre limbs there is effectively no registration threshold: institutions enrolling international students must register regardless of turnover.

The exemptions mirror the healthcare policy’s protective intent: Malaysian citizens (in the tertiary/language limbs), OKU cardholders, and special education schools are exempt.

The RM60,000 fee rule — structuring and its limits

For international schools, the RM60,000-per-student-per-academic-year trigger makes fee architecture a tax question. Which charges count toward the RM60,000 — tuition only, or registration fees, building funds, technology levies and co-curricular charges? RMCD’s guidance treats certain specific education-related charges as exempt, but the boundary is fact-sensitive, and schools that unbundle fees purely to stay under the threshold invite scrutiny. Anti-avoidance exposure aside, misclassifying a taxable charge as an exempt one produces the usual audit outcome: a backdated assessment with penalties. Schools near the threshold should obtain advice — or a ruling — before restructuring their fee schedules, not after.

What are the compliance obligations once registered?

Registered providers must issue compliant invoices showing the tax, file SST-02 returns for each taxable period by the last day of the following month, and remit the tax collected. The penalty-free grace period for the newly-taxed sectors ended on 31 December 2025; from 2026, enforcement is live. Failure to register, file or pay carries fines of up to RM50,000, imprisonment up to three years, or both, plus late-payment penalties.

The audit exposure specific to these sectors is the citizenship and eligibility documentation: a hospital that treated a patient as an exempt Malaysian citizen, or a school that treated a student as an exempt citizen or OKU cardholder, bears the burden of proving that status. Identity documentation collected at admission or enrolment is now, functionally, tax documentation and should be retained accordingly.

Frequently Asked Questions

Do Malaysian citizens pay service tax on private hospital bills? No. The 6% service tax on private healthcare applies only to services provided to non-Malaysian citizens.

Is there SST on international school fees in Malaysia? Yes, at 6%, but only where fees exceed RM60,000 per student per academic year. Below that, pre-tertiary education is not taxed.

Do private universities charge service tax to international students? Yes. Tertiary education and language-centre services provided to non-citizen students are taxable at 6% with no fee threshold, and the institution must register regardless of turnover.

What is the registration threshold for private healthcare providers? RM1.5 million of taxable healthcare services in any 12-month period — but note that exempt services to citizens generally still count toward the threshold.

Are health screening packages taxable? From 1 May 2026, health screening management services are taxable under Service Tax Policy No. 1/2026. Providers and third-party administrators should review their arrangements.

Are OKU cardholders exempt? Yes — education services to OKU cardholders are exempt, and special education schools are outside the scope.

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This article is for general information only and does not constitute legal advice. The position stated is current as at July 2026.

Operating a hospital, clinic, school or education group and unsure of your SST position? The Tax & Customs practice at NZSK Legal advises healthcare and education providers on registration, exemption documentation, fee structuring and Customs audits. Contact us for a consultation.