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2018 Finance Bill Highlights

On Monday, 19 November 2018, the Honorable Finance Minister, YB Tuan Lim Guan Eng, tabled the 2018 Finance Bill.

We are pleased to set out below the salient points of the proposed changes in relation to SST:-

Service Tax on Imported Services

  • Currently, Service Tax is not applicable on imported services.
  • It is proposed that the imposition and scope of Service Tax be widened to include any imported taxable service.
  • This proposal is effective 1 January 2019.

Definition

“imported taxable service” means any taxable service acquired by any person in Malaysia from any person who is outside Malaysia.

Value of Imported Taxable Service

 

Shall be as prescribed by the Minister of Finance.

Time Service Tax is Due

At the time when the payment is made or invoice is received for the service, whichever is the earlier.

 

Duty to Keep Records

The duty to keep records include all records of imported taxable service, which shall also apply to any person other than a taxable person who, in carrying on his business, acquires any imported taxable service.

 

Furnishing of Declaration and Payment of Service Tax Due and Payable

Any person other than a taxable person who, in carrying on his business, acquires any imported taxable service shall—

  1. account for the Service Tax due in a declaration as may be prescribed and the declaration shall be furnished to the Director General (“DG”); and
  2. pay to the DG the amount of Service Tax due and payable by him,

not later than the last day of the month following the end of the month in which the payment on the service has been made by him or invoice is received by him.

Offences

  • Failure to furnish declaration by due date; or
  • Furnishes an incorrect declaration,

 

commits an offence and shall, on conviction, be liable to a fine not exceeding fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both.

  • Failure to pay the Service Tax by the due date

commits an offence and shall, on conviction, be liable to a fine not exceeding fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both.

If no prosecution is instituted, the penalty is calculated based on the number of days late on the amount of Service Tax which remains unpaid i.e.

  • First 30 days – 10% penalty
  • Second 30 days – 15% penalty
  • Third 30 days – 15% penalty

Prosecution for the offence may be instituted after the expiry of the third 30 days period. However, no prosecution shall be instituted against any person who has paid the amount of Service Tax due and payable, and the penalty within the stipulated period.

Power to Assess

Any person other than a taxable person who, in carrying on his business, acquires any imported taxable service—

(i)      fails to furnish a declaration; or

(ii)     furnishes a declaration which appears to the DG to be incomplete or incorrect,

the DG may assess to the best of his judgment the amount of Service Tax due and payable, and the penalty payable as mentioned above, as the case may be, if any, and shall forthwith notify him of the assessment in writing.

 

Sales Tax – Deduction of Sales Tax

  • It is proposed that a new provision (Section 41A) for deduction of Sales Tax be introduced.
  • This proposal is effective 1 January 2019.

Power of Minister

The Minister may make Regulations prescribing:

  1. any amount of Sales Tax to be deducted in respect of taxable goods purchased by any registered manufacturer
  2. any condition for the deduction; and
  3. the form and manner of such deduction.

Scope

 

The deduction of Sales Tax shall be made on taxable goods which are raw materials, components or packaging materials used solely in the manufacturing of taxable goods.

Non-Compliance

Where any registered manufacturer who has made a deduction above fails to comply with any conditions to which the deduction relates, any Sales Tax that has been the subject of the deduction shall become due and payable by the registered manufacturer on the date on which any of the conditions failed to be complied with.

 

Offences

Any person who causes or attempts to cause the deduction of Sales Tax above for himself or for any other person of any amount in excess of the amount properly so deductible for him or for that other person commits an offence and shall, on conviction, be liable—

  1. to a fine not exceeding fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both; and
  2. to a penalty of two times the amount deducted in excess of the amount properly so deductible.

 

Sales Tax – Other Proposal

  • The Sales Tax value for manufacturers who receive taxable goods from any person to be manufactured and subsequently returned to such person, is expanded to include all manufacturers (instead of registered manufacturer)
  • Consequently, the power of the DG to assess any tax due and payable, and penalty payable has been widened to cover any person rather than the existing taxable person.
  • This proposal is effective 1 January 2019.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Contact KPMG

For more information on our core service offerings, please contact:

Petaling Jaya Office

Tai Lai Kok
Executive Director –
Head of Tax and Head of Corporate Tax
ltai1@kpmg.com.my
+ 603 7721 7020

Long Yen Ping
Executive Director –
Head of Global Mobility Services yenpinglong@kpmg.com.my
+ 603 7721 7018

Bob Kee
Executive Director –
Head of Transfer Pricing
bkee@kpmg.com.my
+ 603 7721 7029

Ng Sue Lynn
Executive Director –
Head of Indirect Tax
suelynnng@kpmg.com.my
+ 603 7721 7271

Soh Lian Seng
Executive Director –
Head of Tax Risk Management
lsoh@kpmg.com.my
+ 603 7721 7019

Nicholas Crist
Executive Director –
Corporate Tax
nicholascrist@kpmg.com.my
+ 603 7721 7022

Dato’ Leanne Koh
Executive Director – 
Corporate Tax
leannekoh@kpmg.com.my
+ 603 7721 7026

Neoh Beng Guan
Executive Director – 
Corporate Tax
bneoh@kpmg.com.my
+ 603 7721 7025

Ong Guan Heng
Executive Director – 
Corporate Tax
guanhengong@kpmg.com.my
+ 603 7721 7027

Chang Mei Seen
Executive Director – 
Transfer Pricing
meiseenchang@kpmg.com.my
+ 603 7721 7028

Ivan Goh
Executive Director – 
Transfer Pricing
ivangoh@kpmg.com.my
+ 603 7721 7012

 

 

 

Evelyn Lee 
Executive Director –
Penang Tax
evewflee@kpmg.com.my
+604 238 2288 (ext. 312)

Regina Lau
Executive Director –
Kuching & Miri Tax
reglau@kpmg.com.my
+6082 268 308 (ext. 2188)

Titus Tseu
Executive Director –
Kota Kinabalu Tax
titustseu@kpmg.com.my
+6088 363 020 (ext. 2822)

Ng Fie Lih
Executive Director –
Johor Bahru Tax
flng@kpmg.com.my
+607 266 2213 (ext. 2514)

Crystal Chuah Yoke Chin
Tax Manager –
Ipoh Tax
ycchuah@kpmg.com.my
+605 253 1188 (ext. 320)