PETALING JAYA: Ahead of Budget 2026, Malaysian retailers and shopping mall operators are urging the government to cut the 8% sales and service tax (SST) on rentals and leasing by half.
The Malaysia Retail Chain Association (MRCA) and the Malaysia Shopping Malls Association (PPKM) said the government should phase in the SST on commercial property rental and leasing by reducing the rate to 4% next year and gradually increasing it to 8% over the next 10 years.
This is necessary to give businesses and consumers “sufficient time to adjust”, according to them.
Both associations also urged the government to reduce the SST on construction and refurbishment works from 6% to 3%.
“Refurbishment every two to three years is a compulsory requirement under tenancy agreements and a major cost for retailers.
“Lowering this tax would ease the burden on businesses while ensuring malls remain fresh, attractive, and competitive, especially as Malaysia prepares to welcome international visitors for the upcoming Visit Malaysia 2026,” stated MRCA and PPKM in a joint statement.
MRCA represents over 550 retailers with over 40,000 outlets, while PPKM has more than 733 member malls.
Both associations claim that the financial impact of the SST on tenancy is significant.
A recent survey conducted by PPKM shows that, with average rents of RM7 to RM8 per square foot per month and a nationwide net lettable area of 196.2 million square feet, retailers in Malaysia are expected to face an additional RM1.3bil to RM1.5bil in taxes each year.
By comparison, normal rent increases average about 5% every two to three years.
“The 8% SST is immediate and nearly doubles this pace, creating a sudden cost shock that fundamentally changes the economics of operating in Malaysian malls.
“Without careful policy adjustments, the retail sector, one of Malaysia’s key economic engines, could be seriously weakened.”
As for mall operators, the joint statement said the new 8% SST rate is estimated to add 15% to 18% to their current operating costs.
Faced with the burden, mall operators may have little choice but to reduce tenant incentives, delay capital improvements, or pass costs onto tenants.
MRCA and PPKM added that consumers are also likely to bear the burden if costs are passed on.
The additional RM1.3bil to RM1.5bil in taxes represents about 0.2% to 0.4% of Malaysia’s total retail sales of RM764.9bil last year, pointing to upward pressure on prices.
“The retail industry reiterates its support for the government’s fiscal objectives but stresses that the implementation of new measures must be consistent with the Madani vision of sustainability, inclusivity, and the well-being of the rakyat,” said MRCA and PPKM.
