a) SALES TAX
Sales tax is a single stage tax charged and levied: - on taxable goods manufactured locally in Malaysia by a taxable person, at the time the goods are sold, used or otherwise disposed of by the manufacturer; - on taxable goods imported into Malaysia, at the time of importation.
Sales tax is not charged on goods listed under Proposed Sales Tax (Goods Exempted From Sales Tax) Order. Certain manufacturing activities are exempted through Proposed Sales Tax (Exemption from Registration) Order.
How Sales Tax Works
Govt collects tax at the manufacturer’s level only. Element of sales tax is embedded in the price paid by consumer.
Taxable Person
Taxable person is a person who manufactures taxable goods and is:
- liable to be registered when it has reached sales threshold of RM 500,000.00 for manufacturer and sub-contractor
- registered under Sales Tax Legislation, whether mandatorily registered or voluntarily registered.
Taxable goods manufacturers are required to be registered when sales value of taxable goods has exceeded RM500,000 for 12 months period.
Manufacturers who carry out sub-contract work on taxable goods are required liable to be registered where the value of work performed exceeds RM500,000 for 12 months period.
Taxable goods belong to Registered manufacturer, non-registered manufacturer and manufacturer in special area (FIZ and LMW).
Registered Person will be known as Registered Manufacturers.
Voluntary Registration
Persons can be voluntarily registered when taxable goods sales is below threshold and are exempted from registration.
Determination of Turnover
Manufacturers should calculate the sales value of taxable goods for a period of 12 months using the following methods:
Historical Method
The total value of taxable goods in that month and the 11 months immediately preceding the month;
Future Method
The total value of taxable goods in that month and the 11 months immediately succeeding the month. Exemption from Registration
Manufacturer of non-taxable goods* Manufacturer below threshold Sub-contractor manufacturer below threshold Manufacturing activities that have been exempted from registration. E.g.:
- Tailoring - Installation incorporation of goods into building - Jeweler, optician
* Not eligible for voluntary registration
b) SERVICE TAX
Service tax is a tax charged and levied on taxable services provided by any registered taxable person in Malaysia carrying on his business.
Taxable person is any person who belongs in Malaysia and is prescribed to be a taxable person.
Taxable service is any service which is prescribed to be a taxable service.
Service tax is not chargeable on imported services.
When is Service Tax due and payable
Tax is due and payable when payment is received for taxable service provided to customer by the taxable person.
Threshold
Any person providing taxable services is liable to be registered if the total amount of taxable services provided by him in 12 months exceed threshold.
NO. l SERVICE PROVIDER l TAXABLE SERVICES l THRESHOLD
1. l Accommodation: hotel, inns, lodging house, service apartment, homestay and any other similar establishment l All services including sale of food, drinks and tobacco products l RM 500,000
2. l 1. 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. 2. Caterer 3. Food court operator l All services including prepared or served food or drinks; and sale of tobacco products, alcoholic and non-alcoholic beverages l RM 1,500,000
3. l 1. Night club, dance hall, cabaret 2. First, second or third class public house or first or second class beer house 3. Health or wellness center 4. Massage parlor or similar places l All services including sale of food, drinks and tobacco products l RM 500,000
4. l Private club l All services including sale of food, drinks and tobacco products l RM 500,000
5. l Golf club and driving range l All services including sale of food, drinks and tobacco products l RM 500,000
6. l Private hospital (on ward and food charges only) l Not taxable service
7. l Insurer or takaful operator l 1. General insurance or takaful B2B and general insurance or takaful B2C excluding medical 2. Excludes a. Insuring or takaful coverage of risks relating to the transport of passengers or goods outside Malaysia b. Insuring or takaful coverage of risks incurred on granting credit relating to the export of goods, services or investments outside Malaysia c. Insurance contract or takaful certificate to cover risks outside Malaysia l RM 500,000
8. l Telecommunication and paid television service provider l 1. Telecommunication and related services excluding provisions of services to another Telco provider 2. Paid television broadcasting services l RM 500,000
9. l Customs agent l Services of clearing goods from customs control l No Threshold
10. l Advocates, solicitors and syarie lawyers l Legal services and other charges in connection to such services l RM 500,000
11. l Public accountant l Accounting, auditing, book keeping, consultancy or other professional services and other charges in connection to such services l RM 500,000
12. l Surveyors including registered valuers, appraisers or estate agents l Surveying services including valuation, appraisal, estate agency or professional consultancy services and other charges in connection to such services l RM 500,000
13. l Professional engineer l Engineering consultancy or other professional services and other charges in connection to such services l RM 500,000
14. l Architect l Architectural services including professional consultancy services and other charges in connection to such services l RM 500,000
15. l Management services excluding such services provided by: 1. the developer, joint management body or management corporation to the owners of a building held under a strata title; or 2. asset and fund managers l Management services and other charges in connection to the provision of management services including project management or project coordination l RM 500,000
16. l Consultancy services excluding research and development companies l Professional consultancy services and other charges in connection to such services excluding: 1. Consultancy services related to medical and surgical treatment provided by private clinics or specialist clinics; or 2. Consultancy services in connection with goods or land outside Malaysia or the subject matter relates to a country outside Malaysia l RM 500,000
17. l Employment agency l Employment services excluding: 1. Secondment of employees or supplying employees to work for another person for a period of time; or 2. Employment outside Malaysia l RM 500,000
18. l Private agency l Provision of guards or the protection or security of person, property or business excluding such services to guard or protect the above which is situated outside Malaysia l RM 500,000
19. l Parking operator l Provision of parking spaces for motor vehicles where parking charges are imposed l RM 500,000
20. l Operator of motor vehicle service or repair centre or provider of motor vehicle service or repair l Provision of general servicing, engine repairs and tuning, changing, adjusting and fixing of parts, wheel balancing, wheel alignment or body repairs including knocking, welding or repainting of motor vehicles. l RM 500,000
21. l Courier service operator l Courier delivery services for documents or parcels not exceeding 30 kilograms each excluding such services for documents or parcels: i. from a place outside Malaysia to a place outside Malaysia; ii. from a place within Malaysia to a place outside Malaysia; or iii. from a place outside Malaysia to a place within Malaysia and includes the provision of courier delivery services within Malaysia that forms parts of the service referred to in subparagraphs (ii) and (iii) where the service is provided by the same person l RM 500,000
22. l Hire-and-drive passenger motor vehicle and hire-passenger motor vehicle l Provision of hire-and-drive or hire-passenger motor vehicle services including hire of passenger motor vehicle with or without chauffeur l RM 500,000
23. l Veterinary l Not taxable service
24. l Advertising l Provisions of all advertising services excluding provision of such services for promotion outside Malaysia l RM 500,000
25. l Credit card or charge card services provider regulated by Bank Negara Malaysia l Provision of credit card or charge card services through the issuance of a principal credit card, principal charge card, supplementary credit card or supplementary charge card, whether or not annual subscription or fee is imposed excluding fuel card and charge card in a closed community e.g. education institution or a sports club by its students or members l No Threshold
26. l Betting and gaming provider involving bettings, sweepstakes, lotteries, gaming machines or games of chance. l 1. Betting and gaming services involving bettings, sweepstakes, lotteries, gaming machines or games of chance. 2. Conducting tournaments involving bettings, sweepstakes, lotteries, gaming machines or games of chance. 3. Conducting or allowing the conduct of a card game or any other game by the casino operator. l RM 500,000
27. l Licensed airline operator or air service l Domestic passenger air transport service and all services in connection with such services excluding the air transport route as specified under the Rural Air Services Agreement l RM 500,000
28. l Information technology (IT) services provider l All types of IT services excluding: 1. Sale of goods in connection with the Provision of IT services; 2. IT services in connection with goods or land outside Malaysia or where the subject matter relates to a country outside Malaysia. l RM 500,000
The services provided by the service provider from number 10-16 excludes the said services if provided in connection with:
a. goods or land outside Malaysia or where the subject matter relates to a country outside Malaysia; or b. any statutory fees paid to the government or statutory body
Rate of tax
Tax rate is fixed at 6%.
For provision of credit card or charge card services, a specific rate of tax of RM 25 is imposed upon issuance of principal or supplementary card and every subsequent year or part thereof.
Eligible for Registration
Any person who carries on business of providing taxable services in any prescribed establishment is required to be licensed under the service tax act.
- Hotel - Employment agency
- Insurance and Takaful - Security
- Food and beverage - Management services
- Club - Parking
- Gaming - Motor vehicle service or repair
- Telecommunication / Pay-TV - Courier
- Forwarding agents - Hire and drive car
- Legal - Advertising
- Accounting - Domestic flight except Rural Air Services
- Architectural - Credit or charge card
- Valuer - IT services
- Engineering - Electricity
- Consultancy
How Service Tax Works
Government collects tax at 6% once (at the start).
Determination of Turnover
Mandatory
Any person providing taxable services is liable to be registered if in the case the total amount of taxable services is prescribed, the total amount of taxable services provided by him in 12 months exceed threshold and the liability to be registered is at the following time whichever is the earlier:
Historical Method
The total value of taxable goods in that month and the 11 months immediately preceding the month;
Future Method
The total value of taxable goods in that month and the 11 months immediately succeeding the month.
In the case no amount of taxable services is prescribed, the liability to be registered is on the date of the commencement of the business.
Voluntary Registration
If the total amount of taxable services provided by him in 12 months is below threshold, voluntary registration is by application and subject to conditions determined by DG.
Branch Registration
It is allowed for Service Tax.
Group Registration
It is not applicable.
Filing Tax Returns
Taxable Period
It is bimonthly.
Under Your Sales Tax or Service Tax registration you are given 1st Taxable Period according to your Month (FYE Month), as shown follows:
1. If your registration is effective in an odd month, and you have odd FYE month, your first taxable period will be 1 month.
2. If your registration is effective in an odd month, and you have even FYE month, your fist taxable period will be 2 month.
3. If your registration is effective in an even month, and you have odd FYE month, your first taxable period will be 2 month.
4. If your registration is effective in an even month, and you have even FYE month, your first taxable period will be 1 month.
Example:
FIRST TAXABLE PERIOD and FIRST RETURN and PAYMENT PERIOD for ODD FYE-Month for registration effective date in an odd month (May 2019)
First Taxable Period 1st to 31th May 2019 (One month)
Return and Payment Due Period 1st to 30st June 2019
Subsequent Taxable Period (Every Two Months) Second Taxable Period 1st June to 31th July 2019 (Two months) and so on.
Third: 1st August 2019 to 30th September 2019 Fourth: 1st October to 30th November 2019…. and so on
Example:
FIRST TAXABLE PERIOD and FIRST RETURN and PAYMENT PERIOD for EVEN FYE-Month for registration effective date in an odd month (May 2019)
First Taxable Period 1st May to 30st June 2019 (Two months)
Return and Payment Due Period: 1st July to 31 July 2019
Subsequent Taxable Period (Every Two Months) Second Taxable Period 1st July to 31st August 2019 (Two months) and so on. Third: 1st September to 31st October 2019 Fourth: 1st November to 31st December 2019 …. and so on
If you would like to know more, please contact Bestar.