Guide to Imported Services for Service Tax

It was brought into effect on the 1st of September 2018. Service tax is charged on the service called “taxable service”. Under this act, any individual who provides a taxable service which exceeds the prescribed value threshold must be registered under the Service Tax Act 2018. They will hence be known as a “registered person”.

The registered person is required to impose service tax on any taxable services which is supplied to its customers. However, imported services are subjected to service tax as well for those which are deemed chargeable services.

Guide to Imported Services for Service Tax

 

What Is Meant by Chargeable Service?

The term “chargeable service” in this instance is any service which is prescribed as a taxable service under Section 8 of the Tax Act Services 2018 (First Schedule of the Taxes Regulations Services 2018).

“Imported Chargeable Services” on the other hand, refers to any chargeable services which are acquired by any person in Malaysia from a person who is outside Malaysia. This falls under Section 2, the Service Tax Act 2018.

 

Terms and Conditions of the Services Tax

Section 7 of the Service Tax Act 2018 has been amended and replaced with the following sections:

  • The imposition and scope of service tax:
    • A tax known as service tax should be imposed and levied over –
      (a) any taxable service rendered in Malaysia by a registered person in the course of his business; or
      (b) any taxable service is imported. “

From 1 January 2019, import chargeable services will be subject to service tax. Any person who does business in Malaysia, and who earns taxable services from any service providers outside Malaysia have to pay service tax. Import chargeable services are any service that is designated as a service taxable in the First Schedule, the Service Tax Regulations 2018, and overseas service providers provide related services with goods, land or any matter relating to Malaysia to any person in Malaysia.

 

Payment of Service Tax

For the Taxable Value & Tax Computation, amendments have been made to sub-section 9 (1) namely:

  • In the case of taxable services imported, the value of taxable service of the import shall be as prescribed.

The value of imported taxable services is as it is stipulated under Rule 4A, Services Tax Act 2018 namely:

  • The value of imported taxable services is as follows:
    • If the taxable service imported is obtained by a person in Malaysia that is not related to the person outside Malaysia.
    • In the case of premiums for insurance policies or Takaful contributions for Takaful certificates, premiums or actual Takaful contributions paid; or
    • In the case of taxable imported goods other than the expressed in subparagraph (i), the true value of the service the taxable import; or
    • If the taxable imported service is earned by a person in Malaysia in relation to persons who are outside Malaysia, the value of the imported taxable service if acquired in ordinary business travel by that person not related to people who are outside Malaysia.

 

Tax Payment Requirements by Registered Tax Service Tax Personnel

In accordance with Section 26 of the Service Tax Act 2018, any registered persons for service tax needs to pledge tax on imported chargeable services at the due time of the taxable period in the SST-02 form. The value of imported chargeable services shall be declared in a separate section in B1 of SST-02 by using special code.

The SST-02 Statement needs to be submitted, and payment needs to be made no later from the last day of the month following the expiry of the taxable period. For the taxable charge period under section 25 (3) (c), Service Tax Act 2018, a statement must be submitted and payment shall be made within 30 days from the expiration of the amended taxable period.

 

Tax Payment by an Unregistered Service Tax Person(s)

Section 26A of the Service Tax Act 2018 stipulates the methods and responsibility required for submitting statements and paying service taxes that are due and payable by any persons other than taxable persons.

Any person who is not registered for service tax must pledge tax service over time on top of the imported chargeable services by using SST-02A form. Payments can be made electronically (MySST) or by cheque or a bank draft posted to the Customs Processing Center (CPC) in Kelana Jaya. For more details, please refer SST-02A statement guide.

 

Late Payment Penalty

Delay of payment for service tax by any person from the due date will result in the penalty being imposed as follows.

Number of Late Days Penalty Rate
First 30 Days 10%
Next 30 Days 15%
30 Days Thereafter 15%

 

Responsibility of Persons Not Registered for Service Tax

In accordance with Section 24 (5A), the Service Tax Act 2018, it is compulsory for any persons not registered in conducting its business and obtaining imported chargeable services compulsory to keep a record of all associated transactions. All records shall be kept and maintained for a period of seven (7) years, and it must be kept in Malaysia. These records should be kept at in either Bahasa Malaysia or English.