Sales and services tax for Designated Areas (DA) and Special Areas (SA)
Rising Global Consultants
Implementation of sales and services tax for Designated Areas (DA) and Special Areas (SA)
“Designated Areas” refer to Labuan, Langkawi, and Tioman. “Special Areas” refer to any free zones, licensed warehouses, and licensed manufacturing warehouses, as well as joint development areas. Sales tax will not be levied on taxable goods produced in DA or SA, except for petroleum manufactured in DA. Similarly, sales tax is not levied on taxable goods imported into DA or SA. However, the Finance Minister may declare that certain taxable goods must be subject to sales tax upon importation into DA or SA. Taxable goods subject to sales tax are provided under the Sales Tax (Designated Areas) Order 2018 and the Sales Tax (Special Areas) Order.
Implementation of sales and services tax for Designated Areas (DA)
Designated Areas (DA) within Malaysia, namely Labuan, Langkawi, and Tioman, will implement a special sales and services tax regime. Sales tax does not apply to manufacturing activities in these areas, except for petroleum
Services provided within and between Designated Areas are not subject to service tax unless otherwise specified by the authorities
Sales tax exemptions apply to import activities in Designated Areas, with the following exceptions:
- Import of petroleum to Labuan
- Import of petroleum and cars to Tioman
- Import of marble, petroleum, and anchovies to Langkawi
In terms of exported goods, sales tax is not levied in the following situations:
- From the principal customs area (PCA) to the Designated Areas (considered as export)
- From Designated Areas to the principal customs area (considered as export, subject to sales tax)
- From Designated Areas to Designated Areas
- From Designated Areas to Special Areas
For services:
- From the principal customs area to Designated Areas: Service tax applies, unless otherwise specified by the authorities.
- From Designated Areas to the principal customs area: Service tax applies
- From Designated Areas to Special Areas: Service tax does not apply
Implementation of sales and services tax for Special Areas (SA)
In Malaysia, Special Areas, including free zones, licensed warehouses, licensed manufacturing warehouses, and joint development areas, will implement a special sales and services tax regime. The Sales Tax Act does not apply to manufacturing activities in these areas.
Generally, sales tax is not levied on imported goods to Special Areas, but goods in free zones may be subject to sales tax according to the provisions of the Suggested Special Areas Order.
Services provided within and between Special Areas are not subject to service tax unless otherwise specified by the authorities.
In terms of exported goods, sales tax is not levied in the following situations:
- From the principal customs area (PCA) to Special Areas (considered as export)
- From Special Areas to the principal customs area (considered as export, subject to sales tax)
- From Special Areas to Special Areas
- From Special Areas to Designated Areas
For services:
- From the principal customs area to Special Areas: Service tax does not apply, unless otherwise specified by the authorities
- From Special Areas to the principal customs area: Service tax applies
- From Special Areas to Designated Areas: Service tax does not apply
- From the principal customs area to free zones or licensed manufacturing warehouses: Service tax applies
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