The Royal Malaysian Customs Department (RMCD) has updated its Service Tax guidance on 14 May 2026, introducing four specific conditions that must be met for businesses to qualify for the Non-Reviewable Contract (NRC) exemption.
This clarification is significant because these conditions were not expressly stated in the earlier version of the guide. Businesses that have relied on the exemption since the expansion of Service Tax on 1 July 2025 should review their contracts carefully to ensure continued eligibility.
What Has Changed?
Under the updated guidance, a contract must satisfy all of the following conditions to qualify as a Non-Reviewable Contract:
1. The Contract Must Be in Writing, Signed and Stamped
The contract must:
- Be documented in writing;
- Be signed by all relevant parties; and
- Be duly stamped within the prescribed timeline.
Failure to meet any of these requirements may disqualify the contract from the exemption.
2. The Contract Must Not Contain a Price Revision Clause
The contract must not include any provision that allows:
- Price adjustments;
- Escalation clauses;
- Indexation mechanisms; or
- Any other form of price revision.
Where the contract allows the contract value to be revised, it may not qualify as a Non-Reviewable Contract.
3. The Contract Must Clearly State Key Contract Details
The agreement should clearly specify:
- The type of taxable service provided;
- The contract duration; and
- The fixed contract value.
Contracts with unclear terms or variable pricing arrangements may not meet the exemption requirements.
4. The Contract Must Remain Effective After 1 July 2025
Only contracts that continue to be in force after the Service Tax expansion date may qualify for the exemption.
Expired contracts or contracts terminated before the effective date are not eligible.
What Does This Mean for Your Business?
Many businesses assumed that contracts entered into before the Service Tax expansion automatically qualified for the exemption.
The latest guidance suggests otherwise.
If your contract fails to satisfy any one of the four conditions, Customs may take the position that the exemption does not apply. As a result, Service Tax may have been chargeable from 1 July 2025 onwards.
This could potentially lead to:
- Undercharged Service Tax;
- Additional tax assessments;
- Late payment penalties; and
- Compliance risks during future audits.
Why Early Review Matters
Businesses should not wait until a tax audit to assess their position.
A proactive review of existing contracts can help identify:
- Missing or late stamping issues;
- Price adjustment clauses that may affect eligibility;
- Contracts with unclear pricing structures; and
- Potential Service Tax exposures.
Addressing these matters early can reduce the risk of unexpected tax liabilities and penalties.
How We Can Support You
Our team can assist with:
- Reviewing existing contracts for NRC eligibility;
- Assessing Service Tax exposure and risks;
- Advising on compliance requirements under the updated guidance; and
- Supporting businesses with SST registration and ongoing compliance obligations.
If your business has relied on the Non-Reviewable Contract exemption, now is the time to reassess your position and ensure compliance with the latest RMCD guidance.
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