Starting Jul 1, 2025, the government will impose a six per cent service tax( SST) on private healthcare services rendered to noncitizens, including medical tourists and foreign workers.

At the same time, the United States is introducing tariffs of 25 – 40 per cent on medical device exports from Southeast Asia, including

• Starting July 1, 2025, a six per cent service tax will apply to private healthcare services for non-citizens, raising concerns about compliance, billing, and access, especially for foreign workers.

• New US tariffs( 25-40 per cent) targeting Southeast Asian medical device exports are expected to raise healthcare input costs and strain margins for both public and private providers.

• Joint ministerial task forces, alternative sourcing plans, and temporary tax exemptions indicate active efforts to shield healthcare providers from inflation and supply chain disruptions.

BY HARVINDAR SINGH

Council Member, Chartered Tax Institute of Malaysia Tax Partner, SCS Global Consulting( M) Sdn Bhd

Malaysia, starting Aug 1, 2025.

The SST expansion aims to broaden the tax base without affecting Malaysians, as services for citizens remain exempt. While the tax is not expected to deter medical tourists- who still benefit from Malaysia’ s cost advantage- concerns have been raised about its impact on foreign workers’ access to primary care, with potential consequences for public health.

As announced in Budget 2025, Malaysia is broadening its SST scope to strengthen public finances. For the healthcare sector, the following are relevant:

Sales Tax: Keeps medicines and medical devices zero-rated( 0 per cent), while luxury and nonessentials( e. g., imported salmon,

Private providers also face new administrative burdens, including billing system upgrades and patient segmentation. A grace period until December 31, 2025, allows providers to comply without penalties.

Simultaneously, US tariffs on medical devices and healthcare inputs threaten to raise procurement and operational costs, especially for

silk fabrics) move into 5-10 per cent tax brackets

Service Tax(+ 6 per cent): Now applies to private healthcare services- but only for non-Malaysian patients. Services for Malaysian citizens remain exempt.

Private healthcare providers with annual revenues exceeding RM1.5 million must comply. A compliance grace period runs until Dec 31, 2025- with penalties waived if businesses are acting in good faith and taking steps to register.

INDUSTRY RESPONSE clinics and hospitals dependent on imported equipment.

Public and private providers may face higher prices for pharmaceuticals and supplies, compounded by currency volatility and supply chain uncertainty. In response, the Health Ministry is fast-tracking alternative sourcing, particularly generics from China and India.

Stakeholders such as the Association of Private Hospitals Malaysia( APHM) and the Federation of Private Medical Practitioners( FPMPAM) are calling for delays, exemptions for foreign worker care, and contract flexibility to manage inflation and ensure uninterrupted service delivery.

These twin shocks- tax and trade- underscore the need for policy agility, operational resilience, and targeted support, especially for vulnerable populations.

The healthcare industry’ s ability to adapt will determine whether Malaysia can maintain its regional leadership in affordable, highquality care while navigating global economic shifts.

Tax experts Harvindar Singh and Soh Lian Seng share insights on navigating the financial, operational, and policy challenges confronting the industry.

The Association of Private Hospitals Malaysia( APHM) has urged the Finance Ministry to postpone the rollout of the six per cent SST, citing limited preparation time for billing and compliance systems. Many have echoed these concerns, requesting more lead time for system upgrades.

The Federation of Private Medical Practitioners( FPMPAM) urged the government to exempt primary healthcare for foreign workers, warning that added costs may discourage early treatment and hurt public health. Foreign workers are vulnerable and underserved, which risks deterring them from seeking timely care.

Consumer Advocacy groups, such as FOMCA, also called for the Healthcare SST to be exempted or delayed, noting potential increased administrative costs, higher consultation fees, and reduced access.

IMPACT ON HEALTHCARE

Private hospitals would now charge six per cent for noncitizen patients. However, since medical tourism revenue accounts for about 5 – 10 per cent of private healthcare income, the impact is likely to be minimal. Clinics treating foreign workers( like outpatient care) may see extra costs, potentially leading to service delays or reduced access. Increased system and billing complexity- many providers cited the need for more time to implement changes. The SST for foreign patients is likely to be passed on, resulting in increased billing for noncitizens. There should be no change for Malaysian patients.

STAKEHOLDER REQUEST

The various stakeholders are requesting more implementation time to upgrade systems and avoid disruptions. Also, on the wish list is a full exemption for primary care for foreign workers, or at least a moratorium while alternative financing mechanisms are explored.