Malaysia’s 6% Education Tax to Impact International Students, Ties

• From July 1, 2025, Malaysia will impose a 6% service tax on private educational services for non-Malaysian students.
• The new SST applies to all private institutions serving international students, regardless of revenue.
• Concerns have been raised that the tax may affect international enrolments and Malaysia's appeal as a study destination.

Starting from July 1, 2025, the updated Sales and Service Tax (SST) regulations will impose a 6% service tax on private educational services offered to students who are not Malaysian. This encompasses preschools, schools, colleges, universities, and language institutions, even though public education stays completely excluded.

Private schools are required to register for SST if their annual tuition fees per student exceed RM60,000. For educational institutions and language centers, registration is required for all, regardless of revenue, if they cater to international students. Malaysian nationals are not required to pay the tax.

In a statement issued on June 9, the Ministry of Finance in Malaysia announced that this action is being executed to “strengthen the country’s fiscal position by increasing revenue and broadening the tax base without adding undue burden on the majority of Malaysians”.

Malaysia has been consistently rising in preference as a study location, experiencing a significant increase in students from East Asian nations like China.

Following the announcement, the British Council has released a statement considering the possible effects of the tax on the sector, especially regarding international collaborations.

It noted that “while the expanded SST will not affect Malaysian higher education students (who form the bulk of students from Malaysia) the imposition of SST could well impact enrolments in UK transnational education (TNE) programs, which are mainly run in collaboration with private local institution partners and receive a significant number of international students.

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“This could also impact Malaysia’s attractiveness as a study destination, especially amongst students from developing countries who can be price sensitive,” it continued.

It encouraged UK institutions to consult with local partners for understanding the tax's effects and proposed to connect institutions with tax experts.

Malaysia is a key market for the UK regarding TNE partnerships, and private universities and colleges in Malaysia have a rich history of working with UK institutions to provide UK qualifications domestically.

The announcement arrives as Malaysia strives to meet its official aim of drawing in 250,000 international students by 2025, encompassing public and private higher education institutions – an objective outlined in the Malaysian Education Development Plan 2015-2025.