Malaysia Service Tax 2018

The service tax rate is 6% and will be levied on specific services provided by taxpayers in Malaysia during their business operations

1. Taxable services

• Hotels
• Restaurants
• Clubs
• Gaming
• Insurance and Islamic insurance
• Legal and accounting services
• Surveying, construction, valuation, and engineering
• Consulting and management
• Freight and courier services
• Security services
• Employment agencies
• Parking and car rentals
• Car maintenance and repairs
• Domestic flights (excluding rural air services)
• Telecommunications and paid TV
• Advertising
• Credit cards/debit cards
• Information technology
• Electricity

The scope of the new service tax has expanded to include services such as information technology, electricity, and domestic flights (excluding rural air services). The service tax is a single-layer tax levied by the service provider, with no input or exemption mechanisms

2. Non-taxable services

Imported services and exported services are exempt from service tax

3. Registration threshold

If the value of taxable services exceeds RM 500,000 within 12 months, service providers must register for service tax. The registration threshold for restaurants, bars, snack shops, canteens, cafes, or any place providing food and drinks (excluding educational institution canteens or those run by religious organizations), delicatessens, and food court operators is RM 1,500,000

The service tax registration process can be completed online through the Customs Department’s MySST website. Existing GST-registered businesses will automatically become service tax-registered businesses

Businesses with annual turnover below the registration threshold can choose voluntary registration. Additionally, the new service tax system does not accept group registrations

4. Submit the declaration form

Service tax declaration forms must be submitted every two months, either manually or through the MySST website. The deadline for submitting the first declaration form (for the tax period from September to October 2018) is November 30, 2018

5. Invoice requirements

Service tax registered service providers must issue invoices containing the specified details

1. Unified registration threshold

The new tax system has a unified registration threshold of RM 500,000, applicable to all businesses (excluding credit card/debit card providers below the threshold). The old tax system had varying registration thresholds depending on the taxpayer/taxable service.

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. Group internal exemptions

Under the old tax system, certain types of services provided within a group of companies could benefit from group internal exemptions. However, the new tax system does not include group internal exemptions

1. GST final audit

The Customs Department announced that after the start of the Sales and Services Tax (SST), it will begin conducting GST audits from September 1, 2018, to settle GST accounts

2. Abolishing GST and implementing service tax

For services within the scope of service tax, services provided before September 1, 2018, are subject to GST, while services provided on or after September 1, 2018, are subject to service tax.

For advance billing (invoices issued before September 1, 2018) and advance payments (payments received before September 1, 2018), businesses need to assess whether any part of the service is exempt from service tax.

For credit card/debit card providers, a service tax of RM 25 per card applies, but it will be levied during the next card renewal, not on September 1, 2018.