The annual sales turnover threshold of RM150,000 and RM300,000 in relation to any day of the month means the sales turnover made in the period of 12 months or part thereof immediately before that month.
Sales Turnover in Next 12 months
In the case of a service prescribed as a new taxable service, the threshold is determined with reference to the sales turnover of the 12 months preceding (coming) the month such service is prescribed as a taxable service.
Establishments which are not required to apply for the service tax license by reason of not having reached the threshold should monitor their sales turnover.
The application for a service tax license should be made immediately when the sales turnover reaches the threshold for taxable services and not wait until the expiry of the 12-month period.
Once licensed, the taxable person will continue to be licensed unless he submits his license for cancellation.
Calculation of threshold is determined as follows:
- Based on annual sales turnover starting from the date of business.
- Calculation is based on the charged value of providing taxable service for twelve months.
- Threshold is calculated based on entity and not according to branches.
- If more than one taxable service is involved, the taxable value of services under the same Group should be combined together, e.g. a person providing accountancy and management services. i.e under Group G. If the taxable services are from different Groups, the threshold must be calculated separately, e.g. a private hospital under Group F and parking services under Group G.
- Threshold is calculated on a company annual sales amount and not annual sales earnings for each subsidiary.
- When the annual sales turnover has reached the threshold, service tax license must be applied immediately.
Sales turnover less than threshold
If the sales turnover for the preceding 12 months does not exceed the threshold figure of taxable services, application for the service tax license is not necessary until the threshold is reached.
However, every company is welcome to apply the service tax license on voluntarily basis even though the sales turnover does not reach the threshold. Once licensed, the company is required to comply all requirements under the Service Tax Act.
Cancellation of license
Should annual sales turnover of taxable services fall below the threshold after being licensed, an application in writing can be made for cancellation of the service tax license.
Re-application of license
If sales turnover of taxable services subsequently increases to the threshold figure, application for a service tax license should be made again.
With effect from 1 January 2008, the thresholds for professional, consultancy and management services have been abolished. Thus, the service providers are required to be licensed from the commencement of business of providing taxable services.
Retainer fees are subject to service tax.
Advance payments are also subject to service tax as invoices are issued.
Deposits are not subject to service tax as long as they remain as deposits. Should deposits be transformed into payments either wholly or in part, for the taxable services provided, invoices should be issued and service tax should be charged accordingly.
Certain taxable professional services (e.g. consultancy and management services) provided by a subsidiary company to another subsidiary company within a group of companies are not subject to service tax, effective from 1 January 2003 (subject to conditions).
Taxable services provided to the government are not exempted from service tax.
Taxable services provided to Foreign Embassies would require tax exemptions from the Minister of Finance.