Service Tax in Malaysia

Kastam

Summary

Service Tax in Malaysia is a form of indirect tax imposed on specified services called “taxable services”. Service tax cannot be levied on any service which is not included in the list of taxable service.

Service Tax collected by the companies from the customers are to be remitted to Customs Departments every two months.

A service tax applies to certain prescribed goods and services in Malaysia including foods, drinks and tobacco.

The tax also applies to professional and consultancy services provided by the professional firms or persons such as accountants, lawyers, engineers, architect, insurance companies, etc.

Generally, the imposition of service tax is subject to a specific threshold based on an annual turnover ranging from RM150,000 to RM500,000.


Service Tax Act

The Service Tax Act 1975 applies throughout Malaysia excluding Langkawi, Labuan, Tioman and the Joint Development Authority (JDA).

For the purposes of the Act, the Free Zones shall be deemed to be outside Malaysia. 


Rate of tax

The rate of service tax is 6% of the price, charge or premium of the taxable service with effect from 1 January 2010. Prior to 1 January 2011, the rate of service tax was 5%.

The rate of service tax on the provision of credit card or charge card services effective from 1 January 2010 is as follows:

  1. RM50 per year on the principal card; and
  2. RM25 per year on the supplementary card.

The service tax is chargeable on the date of the issuance of the card and every 12 months thereafter or part thereof after the issuance of the card or on the date of the renewal of the card and every 12 months thereafter or part thereof after the renewal of the card.


Licensing under the Act

Any taxable person who carries on a business of providing taxable service must apply for a license.

The Service Tax Act 1975 also provides for voluntary licensing whereby any person who is not required to be licensed can also apply for a service tax license if he:

  1. provides taxable service; or
  2. is intending to carry on a business of providing taxable services.

“Person” can be an individual, a firm, a society, an association, a company and every other juridical person.

You do not need to pay any fee to Custom Department for the license. The issuance of license by Custom Department is FREE of charge.


Taxable person and taxable service

Taxable person is defined under the Service Tax Act 1975 as any person who is prescribed to be a taxable person and taxable service as any service which is prescribed to be a taxable service under the Second Schedule of the Service Tax Regulations 1975.

That’s mean, whoever required to be licensed is considered Taxable Person.

Any services that has been stated in the Schedule will be defined as Taxable Services.


Payment of service tax

Service tax is due when payment is received for taxable services rendered.

If payment is not received within 12 calendar months from the date of issuance of invoice, the tax is due on the day immediately after the expiry of the 12-month period. (Means you have to pay even though the balance is not collected by you!)

Any service tax that falls due during the taxable period, which is 2 calendar months, is payable to the Customs authorities within 28 days after the end of the taxable period.


Penalty for late payment

Where any payment of service tax is not paid to the Customs authorities within the stipulated period, a mandatory penalty of 10% will be imposed on any unpaid amount.

If the service tax, which is due and payable, remains unpaid for more than 30 days, the penalty will be increased by a further 10% for every succeeding 30 days or part thereof, subject to a maximum of 50%.


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