MALAYSIA SALES TAX 2018
Rising Global Consultants
Sales tax framework
The new sales tax is levied on taxable goods imported into Malaysia or manufactured in Malaysia, with proposed rates of 5% and 10%, and a specific rate for petroleum. Goods not listed in the exempt sales tax list are subject to tax.
According to the Customs Department’s recent guidelines, the “General Exemption” under the Sales Tax (Exemption) Order 2018 will replace the previous procedure for exemption from sales tax on the purchase of raw materials and components (by applying through forms CJ5, CJ5A, and CJ5B).
While this new tax regime aims to minimize the compliance burden for manufacturers in submitting exemption application forms, the Customs Department may need to conduct more audits to ensure that registered sales tax manufacturers correctly utilize the general exemption.
1. Taxable goods
Goods manufactured by or imported into Malaysia by taxpayers are subject to sales tax
2. Exempt goods
Food, chemicals, pharmaceuticals, iron, steel, and machinery are exempt from sales tax
3. Exempt manufacturing activities
Tailoring, jewelry making, optical lens manufacturing, and engraving are considered exempt manufacturing activities
4. Exempt persons
- Federal and state governments
- Rulers of each state
- Local governments
- Inland clearance stations
- Duty-free shops
- Manufacturers of specific non-taxable goods
- Sales tax registered manufacturers purchase raw materials, parts, and packaging used for manufacturing taxable goods.
5. Registration threshold
If the annual turnover of taxable goods exceeds RM 500,000, manufacturers must register for sales tax. The sales tax registration process can be completed online through the Customs Department’s MySST website.
The Customs Department will automatically register sales tax for eligible manufacturers and notify them. These manufacturers must start collecting tax from September 1, 2018. Businesses/individuals obligated to register for sales tax but not automatically registered by September 1, 2018, must register within 30 days after the sales tax comes into effect.
6. Submission of Declaration Forms
Sales tax returns must be submitted every two months, either manually or through the MYSST website
7. Invoice Requirements
Sales tax registered manufacturers must issue invoices that include the specified details
Differences between the old and new sales tax systems
1. Higher registration threshold
The new tax system has a higher registration threshold, excluding small businesses. Unlike the old tax system, businesses with annual turnover below the threshold can choose voluntary registration.
2. Reduced penalties for late tax payment
Under the new tax system, the penalty for late tax payment is 40% of the unpaid tax amount, instead of the previous 50%. Additionally, the maximum penalty applies after 90 days of late payment, rather than the previous 150 days
3. New exemption list
The new tax system has made some changes to the exemption lis
Violations and penalties
Violation: Sales tax evasion—intent to evade tax or assist in evasion
- First offense—fine of 10 to 20 times the sales tax amount, or imprisonment up to 5 years, or both
- Second and subsequent offenses—fine of 20 to 40 times the sales tax amount, or imprisonment up to 7 years, or both
- Providing incorrect information related to tax liability—fine of RM 50,000 or imprisonment up to 3 years, or both
- Obtaining tax refunds through improper means—fine of RM 50,000 or imprisonment up to 3 years, or both
- For violations without specified fines—RM 30,000 fine for each offense
For late payment of tax, the penalty is
- 10%—first 30 days
- 15%—second 30 days
- 15%—third 30 days
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