Malaysia Service Tax 2018
Following the announcement of the re-introduction of SST, the Royal Malaysian Customs Department (“RMCD”) has recently announced the implementation framework of SST as well as a detailed FAQs to arm Malaysians with sufficient knowledge before SST commence.
Service Tax Framework
The service tax will stand at 6% and it would be levied on specific prescribed services provided by a taxable person in the course or furtherance of a business in Malaysia.
1. The taxable services are as follows:
- Food and beverage
- Insurance and takaful
- Legal and accounting services
- Surveying, architectural, valuation, and engineering services
- Consultancy and management services
- Forwarding and courier services
- Security services
- Employment agencies
- Parking and car hire services
- Motor vehicle service and repairs
- Domestic flights (except rural air services)
- Telecommunications and paid-TV services
- Advertising services
- Credit/charge cards
- IT services
The scope of the new Service Tax has an extended list, which has included the provision of IT services, electricity and domestic flights (except Rural Air Services). Do note that service tax is a single-stage tax charged only once by the service provider. Therefore, no input or exemption mechanisms are available for service tax.
2. Non-taxable Services
Under the new framework, imported services and exported services are exempted from the service tax.
3. Registration and Threshold
Service provider who offers taxable services where the taxable services’ value exceeds the MYR500,000 threshold in a 12-month period are required to register for SST except for Operator of restaurant, bar, snack-bar, canteen, coffee house or any place which provides food and drinks (eat-in or take-away , exclude canteen in an educational institution or operated by a religious institution or body), Caterer and Food court operator which the SST registration threshold is RM1,500,000.
Registrations can be processed online via the RMCD MySST system. Please note that the existing GST-registered businesses (that are liable to be registered under the SST framework) will be registered automatically under the MySST system.
For businesses that do not meet the annual turnover thresholds, they can opt for voluntary registration regime under the SST framework. Meanwhile, no group registration is available under the new SST regime.
4. Filing of Returns
The filing of the service tax returns can be done either manually or via the online MySST portal. The filing of returns must be done on a bi-monthly basis. The first returns will be due by 30 November 2018 for the taxable period of September- October 2018.
5. Invoicing Requirements
According to the new tax regime, it is a mandatory requirement that registered services providers to issues invoices with relevant prescribed particulars.
What are the Differences Between the Former Service Tax Act and the Service Tax 2018?
1. Fixed registration threshold
A single registration threshold of MYR 500,000 applies to all business (not including credit/charge card providers that are not subjected to a threshold) while the previous service tax regime has different registration threshold according to the taxable person/taxable services.
2. Reduced late payment penalties
A 40% late payment penalty of tax due will be imposed instead of the previous 50%. In addition, under the new tax regime, the maximum penalty would be reached within 90 days instead of the 150 days.
3. Intragroup relief
The previous tax regime allowed intragroup relief for certain types of services provided within a group of companies. However, no intragroup relief available under the new model.
1. Final GST Audit
RMCD has cleared the air that it will conduct Goods and Services Tax (“GST”) audits for closure purposes from 1 September 2018 after the SST commence.
2. Spanning the abolition of GST and implementation of SST
For services within the scope of service tax, services that are performed before 1 September 2018 are subjected to GST. Meanwhile, any services performed on or after 1 September 2018 will be subjected to service tax.
For the case of advance billings (services invoiced before 1 September) and prepayments (payments made before 1 September), businesses will need to assess whether certain portion of the services are exempted from service tax.
For credit/charge card providers, each card is subjected to a MYR 25 service tax on but the next annual card renewal (not from 1 September 2018).