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Guide to Imported Services for Service Tax | Guide on Imported Taxable Services

With effective from 1 January 2019, imported taxable service is subjected to service tax. In accordance with Section 2 of Service Tax Act 2018, “imported taxable service” means any taxable service acquired by any person in Malaysia from any person who is outside Malaysia.

Guide to Imported Services for Service Tax

 

Filing of Return and Tax Payment – SST Registrant

In accordance with Section 26 of Service Tax Act 2018, the SST registrant needs to pledge tax on imported taxable services in Form SST-02. The value of imported taxable services shall be declared separately in section B1 of Form SST-02.

The Form SST-02 needs to be submitted and the payment needs to be made not later than the last day of the month following the end of the taxable period.

 

Filing of Return and Tax Payment – Non SST Registrant

In accordance with Section 26A of Service Tax Act 2018, the non SST registrant needs to pledge tax on imported taxable services in Form SST-02A.

The Form SST-02A needs to be submitted and the payment needs to be made not later than the last day of the month following the end of the month in which the payment on the service has been made by him or invoices is received by him.

 

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 Non SST Registrant

In accordance with Section 24 (5A) of Service Tax Act 2018, it is compulsory for non SST registrant who is conducting its business and obtaining imported taxable services 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 in either Bahasa Malaysia or English.

 

Service Tax Exemption

There are 3 scenarios in which the imported taxable services can be exempted from service tax: –

  1. Imported taxable services are related to: –
      • goods or land situated outside Malaysia
      • matters outside Malaysia
  2. Intra-group reliefIntra-group relief is applicable on the acquisition of imported taxable services under Group G – Professional Services, First Schedule of Service Tax Regulations 2018 (except for employment services and private agency).If a company acquires the mentioned taxable services from a company within the same group of companies outside of Malaysia, such acquisition of service would not be considered as imported taxable service (not subject to service tax). 
  3. Exemption of service tax on B2B servicesEffective from 1 January 2019, specific taxable services i.e. professional services (except for employment services and private agency) and advertising services provided by a registered person to another registered person who is registered for the same service are exempted from service tax.The conditions for the exemption to be applicable for the recipient of the services are as follows:
    • Acquirers of taxable service are registered in the same taxable Group as the provider of taxable service; and
    • The services acquired must be the same category of taxable service as provided by the recipient to the customer.

    Effective from 1 January 2020, B2B exemption is also extended to :-

    • digital services acquired from foreign registered person by SST registrant; and
    • information technology (IT) service and advertising service acquired from any person who is outside Malaysia by SST registered person. The taxable service exempted must be identical to the IT service and advertising service distributed by the registered person.  

    To be entitled to B2B exemption, the following conditions would need to be fulfilled: –

    • Imported services are for furtherance of business and not for personal consumption;
    • Has paid the amount payable of imported services to the service provider; and
    • Imported services are acquired after 1 January 2020.