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Service Tax Policy

Following the Ministry of Finance’s Media Release on 30 December 2019, the Royal Malaysian Customs Department has issued a number of Service Tax Policies to provide more details on the measures put in place to address potential Service Tax cascading on imported services.

Please click on the above header link for a copy of the Service Tax Policies at the MySST portal.

Set out below is a summary of the Service Tax Policies.  Please refer to the respective Service Tax Policy for more details.

1.      Service Tax Policy 1/2020 – Expansion of Scope of Taxable Service

•    Effective 1 January 2020, amendments were made to the following:-

Expansion of existing taxable service

(a)    Provision of IT service includes distributing or reselling of IT services on behalf of any person;

(b)    Provision of telecommunication service includes digital service.

(c)    Provision of advertising service includes digital advertising service.

New taxable service

(a)    Provision of electronic medium that allows the suppliers to provide supplies to customers. 

(b)    Provision of digital service including transaction for provision of digital services on behalf of any person.

§    A person who is liable to be registered (based on historical method) is required to apply for registration not later than 29 February 2020 and the registration will take effect on 1 March 2020.  The registered person shall charge Service Tax from 1 March 2020.

§    For an existing registered person, changes must be made to his registration and he shall charge Service Tax from the date of the registration of the new service.

2.      Service Tax Policy 2/2020 – Service Tax Exemption on Imported Taxable Service

•   Effective 1 January 2020, subject to the following conditions, a registered person is exempted from self-accounting for Service Tax on imported taxable service:-

(a)    He must be a Service Tax registered person and account for Service Tax using SST-02 Form;

(b)    He must provide the same taxable service that he imported to his customers;

(c)    The imported taxable service must be for the furtherance of business and not for personal consumption; and

(d)    He has paid the amount payable for the imported taxable service to the service provider;

•   To qualify for the exemption, the taxable service imported must be professional services under Group G (except employment services and guard/ security services) and advertising services under Group I, acquired from 1 January 2020.

•    This exemption excludes digital services acquired from a foreign registered person (“FRP”).

Note that there is a separate exemption for imported digital services under Item 3 of the Service Tax (Persons Exempted from Payment of Tax) Order 2018.

•    Where the Service Tax has been self-accounted for prior to 1 January 2020, no refund is allowed.

3.      Service Tax Policy 3/2020 – Service Tax Policy on Claiming a Refund by Offsetting Method on Service Tax on Imported Digital Service Provided by FRP

•    Effective 1 January 2020, subject to the following conditions, a local registered person is allowed to claim a refund on Service Tax paid to a FRP on digital services:-

(a)    He must be a Service Tax registered person;

(b)    He must provide the same digital service that he acquired to his customers;

(c)    The digital service must be for the furtherance of business and not for personal consumption;

(d)    The digital service must be provided by a FRP; and

(e)    The payment of Service Tax has been made to the FRP.

•    Where the Service Tax has been self-accounted for prior to 1 January 2020, no refund is allowed.

•    A claim for refund (offsetting method) can be made in the SST-02 Form under item 13(c) in the taxable period in which the Service Tax is paid to the FRP.

4.      Service Tax Policy 4/2020 – Service Tax on Online Distance Learning Services

•    Effective 1 January 2020, the provision of online distance learning services (digital services) as follows:-

(a)    Preschool education;

(b)    Primary and secondary education; or

(c)    Tertiary education including vocational education and professional trainings

provided by both foreign service providers and local service providers are not subject to Service Tax.

•    The services must be approved under the relevant Act or recognised by the relevant authority in that country.

5.      Service Tax Policy 5/2020 – Service Tax on Online Newspaper, Online Journals and Periodicals

•   Effective 1 January 2020, online newspapers, online journals and periodicals (digital services) provided by both foreign service providers and local service providers are not subject to Service Tax.

•    For a local service provider who has accounted for Service Tax on the above services to be provided on/ after 1 January 2020 but payment has not been received, a credit note must be issued to make the necessary adjustment.

•    No claiming of Service Tax refund is allowed for any person who has paid the Service Tax.

•    For imported taxable service (IT service) to be provided on/ after 1 January 2020 where Service Tax has been self-accounted for before 1 January 2020, no refund claim is allowed.

6.      Service Tax Policy 6/2020 – Service Tax Treatment on Provision of Training and Coaching Services for Disabled Person

•    Effective 1 January 2020, training services or coaching services provided to a person who holds a valid OKU Card issued under the Persons with Disabilities Act 2008 are not subject to Service Tax, provided the service provider is a training centre or coaching centre:-

(a)    registered with the Ministry of Health;

(b)     registered with the Social Welfare Department; or

(c)    recognized by any national association for persons with disabilities registered with the Registrar of Societies Malaysia.

Seminar on Sales Tax and Service Tax Latest Updates

With the above latest Service Tax Policies, coupled with numerous legislative changes effective 1 January 2020, it is imperative for businesses to ensure that they are continuously updated and in compliance to avoid potential errors in Sales Tax and Service Tax reporting which could result in hefty penalties.

Recognising the challenges to keep abreast, we will be organising a half-day Seminar where we will provide a refresher course on the provisions in the legislations as well as key changes effective 1 January 2020, including the introduction of Service Tax on digital services.  Keep a lookout for our e-Vite on this. 

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

Should you have any questions or require further clarification, please do not hesitate to contact any of our Executive Directors, Directors, Associate Directors or Managers whom you are accustomed to dealing with or who are responsible for the tax affairs of your organisation at the following telephone numbers for respective offices:

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)