Employment Services SST Changed Again: How Malaysian Businesses Should Read the Invoice

Short answer

As at 10 September 2026, Customs' current employment-services guide says that a registered provider's employment-service fee is subject to 8% service tax. It excludes permitted expenses recovered from a customer without mark-up from the value of the employment service. Those recoveries need supporting documents, and the invoice should itemise the employment service and the permitted recoverable expenses.

A label such as “reimbursement” or “secondment” does not settle the position. The guide says the entire value of a marked-up recoverable expense is taxable. A temporary employee secondment is outside employment services only if every condition in Customs Public Ruling No. 5/2026 is met.

If an invoice looks wrong, do not edit the supplier's document or assume that a Customs refund follows. Invoice correction, SST return adjustment, repayment to the customer and a claim against Customs are separate steps.

Quick guide: check these six things first

1. Identify the actual service: employment services, recruitment, management, EOR or a claimed temporary secondment.
2. Split the provider's employment-service fee from every cost recovery.
3. Match each claimed recovery to its source record and check for a margin, handling charge or other uplift.
4. Find out whether the invoice was only issued, was included in an SST return, or the tax was also paid to Customs.
5. Ask the registered supplier in writing for its classification, taxable-value calculation and proper supplier-issued correction. For a credit or debit note—not an ordinary invoice—check the note-specific details, including its label and serial number, supplier and buyer details, reason, tax adjustment and original invoice reference.
6. If a separate section 38 claim against Customs is needed, the procedure checked on 10 September 2026 uses JKDM No. 2 and submission to the Revenue Accounting Branch, Technical Services Division, in the controlling zone or state. Confirm the controlling office and current form before filing; the statutory claim period is one year from the overpayment or erroneous payment.

What the current official guide says

The MySST Industry Guides page currently lists “Employment Services (Malay version only)” dated 14 May 2024. In its current text, Version 3 says:

• employment services have been taxed at 8% from 1 March 2024;
• service tax applies to the value of the employment service, excluding permitted expenses recovered from the customer without mark-up;
• no-mark-up recoveries require supporting documents; the guide's non-exhaustive examples include emoluments, levies, travel to Malaysia, work permits, insurance fees and mandatory worker medical examinations;
• the entire value of a permitted expense recovered with mark-up is taxable; and
• where the employment service and permitted recoverable expenses are not itemised on the invoice, service tax is charged on the taxable-service value in the ordinary course of the provider's business.

The rate instrument changed in 2025. P.U. (A) 173/2025 now fixes the general rate at 8%, with 6% for services in its First Schedule and the stated rate for its Second Schedule. Employment services are not in those schedules. P.U. (A) 125/2026 added rental or leasing to the 6% First Schedule but did not add employment services. The 2024 order remains relevant to the historical increase from 1 March 2024, not as the current complete exception list.

Is every employment-services supplier automatically registered?

No. The 8% treatment in this guide concerns a registered provider, but registration depends on the statutory and scheduled tests. For Group G, the First Schedule to the Service Tax Regulations sets a threshold of more than RM500,000 for the relevant taxable person's Group G taxable services, whether one such service is counted on its own or more than one Group G service is combined. The test is therefore not limited to employment-services turnover if that person also supplies another taxable service in Group G.

Section 12(2) of the Service Tax Act uses two twelve-month tests and liability arises at the earlier one. The historical test is met at the end of a month when the total for that month and the immediately preceding eleven months has exceeded the prescribed threshold. The future test is met at the end of a month when there are reasonable grounds to believe the total for that month and the immediately succeeding eleven months will exceed it. The supplier still has to check that it is the taxable person and that the services fall within the scheduled descriptions and exclusions; the invoice label alone does not answer those questions.

Read the invoice by substance, not its heading

Two worked contrasts

Assume a post-1 March 2024 employment service by a registered provider.

• Exact separate recovery: RM12,000 provider fee + RM960 SST + exact RM1,000 permitted recovery without mark-up = RM13,960.
• Marked-up recovery: a RM9,000 provider fee attracts RM720 SST. If a RM1,500 claimed recovery contains value added, the guide treats the entire RM1,500 as taxable, adding RM120 SST. Total: RM9,720 + RM1,620 = RM11,340.

A single RM13,000 “manpower services” line does not provide enough information to calculate the correct tax merely because it is bundled. The supplier should first identify the service fee and each supported recovery. The customer should not invent the split or rewrite the invoice.

A secondment must pass all eight conditions

Public Ruling No. 5/2026 took effect on 12 August 2026. For the temporary placement to fall outside employment services under the ruling:

1. there must be an employee-loan contract between the original employer and the receiving company;
2. the original employer's business activity must be something other than providing employment services, including acting as an employment agency or professional employer organisation;
3. the original employer must transfer the worker temporarily for a specified period, after which the worker returns to the same employer to continue working;
4. the worker must remain employed by the original employer, without a break in that employment;
5. during the loan, the worker must work only for the receiving company;
6. the receiving company must have full control over the worker;
7. the receiving company must pay the worker's salary and allowances at cost, directly or indirectly, with no additional charge; and
8. the placement must be for less than six months in the placement year and must not continue into the following year.

If any one condition is not met, paragraph 3.2 says the temporary placement is a taxable service subject to service tax. The ruling does not classify every EOR, recruitment, management or related-party arrangement.

An invoice charge, tax due and tax paid are different facts

Under the normal payment basis in section 11 of the Service Tax Act, tax becomes due when the registered provider receives payment. If payment is not received within 12 months from the service date, it becomes due the next day. Customs may approve invoice-basis accounting on written application, so the provider must check its own approval.

Section 21 requires a registered provider to collect service tax from the customer in addition to the taxable-service value and other amounts due. Section 28 allows Customs to recover an amount shown as service tax from the invoice issuer even if the service did not take place or the tax shown was not chargeable. That is why a wrong tax line needs a proper supplier-side correction, not a customer's handwritten reduction.

If you are the customer

Ask the supplier to confirm the service classification, provider fee, each recovery, any mark-up, and whether the invoice was included in SST-02 or the tax paid to Customs. A useful message is:

Please explain the service classification and taxable value, and match each claimed recovery to its source cost. If the invoice is wrong, please issue the proper supplier document and explain separately how any amount we paid will be credited or refunded.

Keep the original invoice, contract, schedule, payment proof and reply. The Act does not give a business customer an automatic direct Customs refund merely because it paid the supplier. Start by seeking a corrected account and repayment from the supplier; the contract and payment facts still matter. Obtain advice before withholding a disputed balance.

If you are the provider

Invoice issued but not yet returned: current MySST guidance says invoices and copies must not be altered. An erroneous original and its duplicates are void, must be marked “CANCELLED” and retained for audit. Use your controlled invoice process for the fresh document.

What particulars should the replacement invoice contain?

A replacement invoice still has to contain the prescribed invoice particulars; separating the fee and recoveries is not enough by itself. Section 21(1) of the Service Tax Act requires Bahasa Malaysia or English. Regulation 10(1) requires:

• the invoice serial number and date;
• the registered person's name, address and identification number;
• a description sufficient to identify the taxable services;
• any discount offered;
• the total excluding service tax, the service-tax rate and the service tax charged as a separate amount;
• the total including service tax; and
• any non-ringgit amount also shown in ringgit at the Malaysian selling exchange rate when the taxable services were provided.

The Director General may, on the registered person's written request and subject to conditions, allow a prescribed particular to be omitted. Do not assume that a fee-and-recovery breakdown alone makes the fresh invoice compliant.

Return already furnished: Act 807 and current MySST guidance use a credit note when the invoice value or tax falls, and a debit note when it rises. The 31 May 2026 SST-02 guide says that where a credit note concerns service tax declared in an earlier return, its tax amount can be taken as an adjustment or deduction in SST-02 for the following taxable period. Confirm the affected period before filing. Regulation 11 lists the note's prescribed particulars, including the reason, service, amounts, rate and tax, and original invoice number and date. Current MySST guidance also tells the provider to show the buyer's name and address. Those are correction-note details, not the ordinary invoice-particulars list above. On a registered person's written request, the Director General may allow a prescribed particular to be omitted, subject to conditions.

Return itself wrong: regulation 15, as substituted with effect from 1 January 2024, allows a taxable person to correct an error in the form and manner determined by the Director General. The 2026 SST-02 manual gives current manual and amendment guidance, but it does not mean every old period can simply be reopened online. Do not assume that a credit note, return correction and refund claim are interchangeable.

Who returns the money?

Keep these routes separate:

1. Supplier to customer. A corrected invoice or credit note records the reduction. The customer credit or cash refund also needs its own proof.
2. Provider's return adjustment. The current SST-02 guide places a credit-note amount relating to tax declared in an earlier return in the following taxable period's SST-02 adjustment or deduction. Confirm the provider's affected period; this accounting entry is not proof that the customer received money.
3. Claim against Customs. Section 38 allows a person who overpaid or erroneously paid covered tax or money to claim a refund within one year from that event. The claim needs evidence and Director General satisfaction, and may be reduced or refused to prevent unjust enrichment. A questioned invoice does not make approval automatic.

Section 39 is narrower. It concerns a registered provider that paid tax and later refunded it to a customer who is not doing business, for cancellation, termination or another approved reason. It requires approval and generally places the deduction within one year after payment, unless extended. Do not assume that this fits a business customer.

If a separate claim against Customs is needed

P.U. (A) 413/2023, effective 1 January 2024, deleted the Regulations' definition of “Forms JKDM No. 2” and replaced regulation 18(1) with a rule allowing an eligible person to apply to the Director General. Customs later set the current administrative form and route in Public Ruling No. 1/2025. As checked on 10 September 2026, paragraphs 38–42 say that refund applications under the Service Tax Act use JKDM No. 2 and must be submitted to the Revenue Accounting Branch, Technical Services Division, in the controlling zone or state. The actual Customs-hosted JKDM No. 2 (Pin. 1/2018) form includes a Service Tax Act 2018 section 38 option.

Confirm which zone or state controls the provider's registration and recheck the current form before submitting, because Customs can replace forms and administrative routes. Keep the completed form, calculation, affected invoice and return, proof of payment to Customs, credit or repayment records, and correspondence supporting why the payment was excessive or erroneous. The form and filing route do not extend section 38's one-year limit, prove that the claimant made the relevant payment or guarantee approval.

Build one evidence pack

Keep, by invoice and taxable period:

• contract, purchase order and service-classification note;
• original invoice, cancelled copies, replacement document and credit/debit note;
• schedule separating the employment-service fee from each claimed recovery;
• source cost, payment proof, no-mark-up calculation and allocation method;
• customer query, supplier response and proof of customer repayment;
• affected SST-02, Customs payment and any approval or correspondence; and
• for secondment, evidence for every condition in Public Ruling No. 5/2026.

Section 24 requires a taxable person to keep complete and true SST records for seven years from the latest date to which they relate. Seek Malaysian indirect-tax advice where several periods, large recurring invoices, related-party arrangements, invoice-basis approval or a Customs inquiry are involved.

FAQ

Are salaries or statutory costs always outside SST?

No. They must be permitted recoverable expenses without mark-up, supported by documents, and correctly separated from the taxable employment service. The actual service classification also matters.

Can a customer delete SST before paying?

Do not alter the supplier's invoice. Ask for the calculation and proper correction. Withholding payment is a separate contractual question.

Is every at-cost group recharge a secondment?

No. Public Ruling No. 5/2026 requires all eight conditions; at-cost payment is only one part of the test.

Is a credit note the same as a Customs refund?

No. It records a supplier-side reduction and affects the provider's return. Customer repayment and a claim against Customs each require separate proof.

Which deadline applies?

Section 38 states one year from the overpayment or erroneous payment for that refund claim. Other actions depend on the document, taxable period, approval and current Customs process; confirm the live procedure instead of guessing.

Which form is used for a section 38 service-tax refund claim, and where is it sent?

As checked on 10 September 2026, Customs Public Ruling No. 1/2025 says to use JKDM No. 2 for a Service Tax Act refund application and submit it to the Revenue Accounting Branch, Technical Services Division, in the controlling zone or state. Confirm the controlling office and current form before filing. The one-year statutory period, evidence requirement and unjust-enrichment limit still apply.

Disclaimer

This is general Malaysian SST information, not legal, tax or accounting advice. It does not classify every manpower, recruitment, EOR, management or related-party arrangement. Sources and current URL identities were checked on 10 September 2026. Customs guidance, forms and system routes can change. Check the current MySST materials and obtain advice on the actual contract, registration, taxable period, invoice, return and payment history.

Sources

1. Royal Malaysian Customs Department, “Panduan Perkhidmatan Pekerjaan, Version 3” (14 May 2024) — the current guide text; supports the employment-services scope, permitted no-mark-up recoveries, supporting documents, marked-up recovery treatment and invoice-itemisation point. https://pub-359af8e1f79c472292a7e44ec60f3027.r2.dev/Industry%20Guides/MS/Panduan%20Perkhidmatan%20Pekerjaan%20V3%2014052024.pdf
2. Royal Malaysian Customs Department, “Public Ruling No. 5/2026: Meaning of Temporary Secondment of Employees for Employment Services” (effective 12 August 2026) — the eight cumulative conditions and failed-condition consequence. https://pub-359af8e1f79c472292a7e44ec60f3027.r2.dev/SST%20Public%20Rulings/Ketetapan%20Umum%20Bil.%205.2026%20-%20Penetapan%20Maksud%20%20Penempatan%20Pekerja%20Secara%20Sementara%20(Secondment%20Of%20Employees)%20Bagi%20Perkhidmatan%20Pekerjaan.pdf
3. Attorney General's Chambers of Malaysia, “Service Tax Act 2018 (Act 807), online updated text” (as at 1 December 2024) — sections 11, 12, 21, 23, 24, 28, 38 and 39; the document says it is an updated text, not an authentic reprint. https://lom.agc.gov.my/ilims/upload/portal/akta/outputaktap/2590513_BI/Act%20807%20(Online%202024).pdf
4. Federal Government Gazette, “Service Tax (Rate of Tax) (Amendment) Order 2024, P.U. (A) 64” (effective 1 March 2024) — the historical move to 8% for employment services; its exception list was later replaced. https://mysst.customs.gov.my/wp-content/uploads/2025/03/PERINTAH-CUKAI-PERKHIDMATAN-KADAR-CUKAI-PINDAAN-2024.pdf
5. Federal Government Gazette, “Service Tax (Rate of Tax) (Amendment) Order 2025, P.U. (A) 173” (effective 1 July 2025) — replaces the general rate paragraph and schedules; employment services remain at 8%. https://pub-359af8e1f79c472292a7e44ec60f3027.r2.dev/SST%20Orders/Perintah-CP-Kadar-CukaiPindaan-2025.pdf
6. Federal Government Gazette, “Service Tax (Rate of Tax) (Amendment) Order 2026, P.U. (A) 125” (deemed effective 1 January 2026) — adds rental or leasing to the 6% schedule without adding employment services. https://pub-359af8e1f79c472292a7e44ec60f3027.r2.dev/SST%20Orders/Perintah%20Cukai%20Perkhidmatan%20(Kadar%20Cukai)(Pindaan)%202026.pdf
7. Federal Government Gazette, “Service Tax Regulations 2018, P.U. (A) 214” — the Group G combined-or-single threshold and principal invoice and credit/debit-note provisions; read with later amendments rather than as a current standalone consolidation. https://mysst.customs.gov.my/wp-content/uploads/2025/03/Service-Tax-Regulations-2018.pdf
8. Federal Government Gazette, “Service Tax (Amendment) (No. 2) Regulations 2020, P.U. (A) 422” — regulation 11's registered-person wording. https://mysst.customs.gov.my/wp-content/uploads/2025/03/Service-Tax-Regulations-Amendment-No2-2020.pdf
9. Federal Government Gazette, “Service Tax (Amendment) Regulations 2023, P.U. (A) 150” — allows omission of prescribed credit/debit-note particulars on a registered person's written request and Director General approval. https://pub-359af8e1f79c472292a7e44ec60f3027.r2.dev/SST%20Regulations/Service%20Tax%20(Amendment)%20Regulations_PUA150.pdf
10. Federal Government Gazette, “Service Tax (Amendment) (No. 2) Regulations 2023, P.U. (A) 413” (effective 1 January 2024) — replaces regulation 15, deletes the JKDM No. 2 definition and replaces regulation 18(1) without prescribing that form. https://mystods.customs.gov.my/storage/app/media/pdf/legislation/9-PUA413_2023_SERVICE_TAX%20_AMENDMENT_NO_2.pdf
11. Royal Malaysian Customs Department, “Issuing Invoices” (page last updated 19 July 2026) — ordinary invoice particulars, cancellation, the separate credit/debit-note checklist and payment-basis guidance. https://mysst.customs.gov.my/issuing-invoices/
12. Royal Malaysian Customs Department, “Panduan Mengisi Penyata SST-02 (Secara Manual/Pindaan)” (31 May 2026) — SST-02 credit-note and approved deductions; MySST system steps sit in separate guides. https://mysst.customs.gov.my/wp-content/uploads/2026/07/Panduan-Mengisi-Penyata-SST-02-Manual-Pindaan-BM-2026-2.pdf
13. Royal Malaysian Customs Department, “Industry Guides” (page last updated 19 July 2026) — identifies the employment-services guide currently listed by MySST. https://mysst.customs.gov.my/industry-guides/
14. Royal Malaysian Customs Department, “SST Forms” (page last updated 19 July 2026; checked 10 September 2026) — corroborates that MySST continues to list JKDM No. 2; the operative current form and submission route are stated in Public Ruling No. 1/2025 below. https://mysst.customs.gov.my/sst-forms/
15. Royal Malaysian Customs Department, “Public Ruling No. 1/2025: Forms, Returns, Application Methods and Payment Methods under the Tourism Tax Act 2017, Sales Tax Act 2018 and Service Tax Act 2018” (published 18 August 2025; checked 10 September 2026) — paragraphs 38–42 identify JKDM No. 2 for Service Tax Act refund applications and the controlling-zone/state Revenue Accounting Branch submission route. https://pub-359af8e1f79c472292a7e44ec60f3027.r2.dev/SST%20Public%20Rulings/KETETAPAN%20UMUM%20BIL.12025.pdf
16. Royal Malaysian Customs Department, “JKDM No. 2 (Pin. 1/2018)” (checked 10 September 2026) — the current Customs-hosted form identifies refund claims under the Service Tax Act 2018, including section 38. https://mysst.customs.gov.my/wp-content/uploads/2025/03/JKDM-No.-2.pdf