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The Royal Malaysian Customs Department (“RMCD) has just recently 3 Service Tax Policies to provide further clarifications on recent developments relating to Service Tax. 

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 7/2020 – Accounting of Service Tax for Persons Exempted from Payment of Service Tax under Item 3 and Item 4, Service Tax (Persons Exempted from Payment of Tax) Order 2018 

  • Effective 1 January 2020, subject to meeting conditions, the following persons are exempted from self- accounting for Service Tax on imported taxable services:- 

                (a) Item 3 – any person who, in carrying on his business, acquires digital services from foreign registered person. 

                (b) Item 4 – any taxable person who provides information technology services (“ITS”) that acquired ITS from any person outside Malaysia. 

  • In view of the above exemptions, taxable persons are not required to declare the imported taxable service in the SST-02 Return.  
  • Similarly, persons other than taxable persons are not required to furnish any SST-02A declaration (for the acquisition of digital services from foreign registered person). 

2. Service Tax Policy 8/2020 – Group Relief Facility on Provision of Taxable Services to Company within the Same Group of Companies 

  • Effective 1 January 2020, the group relief facility may still be applicable to taxable services provided to group members even if the same service is provided to any third party, provided such value to third parties does not exceed an amount equal to 5% of the total value of taxable services within a period of 12-month. 
  • The 12-month period is based on future method i.e. current month and 11 months immediately succeeding that month.  
  • Amongst others, services that qualified for group relief is management services.  “Same service” in the context of management services refers to sub items (i) to (x) – e.g. project management services, maintenance management services, warehousing management services and etc. 
  • Service Tax shall be charged on the taxable services provided to group members where there is additional transaction to third parties and the total value of taxable services to third parties exceeds the 5% threshold. 
  • Where it cannot be ascertained that total value of taxable services to third parties will not exceed the 5% threshold, Service Tax shall be charged on the taxable services provided to group members. 
  • Adjustments can be made subsequently via the issuance of credit note to group members if the value of services provided to third parties is 5% or less, in which the group relief facility is applicable. 
  • In determining the total value of services for registration purpose, both the value of the same taxable service provided to group members and third parties shall be taken into account.  The person shall remain registered, even if the value of taxable services to third parties does not exceed the 5% threshold. 
  • Where the same taxable service was provided to third parties before 1 January 2020, the group relief facility does not apply, even if the value of taxable services provided to the third parties does not exceed the 5% threshold. 
  • The above group relief facility only applies to taxable services provided by a registered person in Malaysia and does not apply to imported taxable services acquired from group members outside Malaysia. 

3. Service Tax Policy 9/2020 – Service Tax Treatment on Taxable Services under Group A: Accommodation, First Schedule of Service Tax Regulations 2018 based on the Economic Stimulus Package 2020 (Pre 2020)

  • The accommodation premise operators including hotels, inns, lodging house, service apartment, homestay and other similar establishment are exempted from charging Service Tax on taxable services provided from 1 March 2020 to 31 August 2020. 
  • The taxable services which qualified for exemptions are:-

                (a) Provision of accommodation premises;

                (b) Provision of any other taxable service specified in other Groups in the First Schedule of Service Tax Regulations 2018;

                (c) Provision of other services within the accommodation premises (e.g. rental of space in the accommodation premise by the operator); and 

                (d) Provision or sale of tobacco products and alcoholic and non-alcoholic beverages. 

  • The provision of the above services by a person other than a registered person under Group A: Accommodation is still taxable (e.g. registered car park operator at a hotel, registered restaurant operator at a hotel). 
  • Invoice shall be issued and Service Tax chargeable shall be stated as “0%” or “exempted” .  The amount of Service Tax exempted shall be declared in item 18(c) of the SST-02 Return. 
  • There is no exemption on Tourism Tax and shall remain applicable. 
  • Transitional rules:- 

Scenarios

Service Tax Implications

Services that took place on 29 February 2020 and ended on 1 March 2020

6% Service Tax is applicable

Services that will take place on 31 August 2020 and end on 1 September 2020

Service Tax is not applicable (exempted)

Services that took place on 29 February 2020 and ending on 3 March 2020

Apportionment – only services provided from 1 March 2020 to 31 August 2020 will not be subject to Service Tax

Service Tax has been charged and collected for services to be rendered from 1 March 2020 to 31 August 2020, but has not been accounted for to RMCD

The accommodation premise operator to issue credit note

Service Tax has been charged and collected for services to be rendered from 1 March 2020 to 31 August 2020, and accounted for to RMCD

  • For individuals – the accommodation premise operator to refund the Service Tax amount and apply for deduction under Section 39 of the Service Tax Act 2018, subject to meeting conditions
  • For customers other than individuals - The accommodation premise operator to issue credit note and make adjustment in the SST-02 Return accordingly

Where Service Tax has been charged and collected for services to be rendered from 1 March 2020 to 31 August 2020, but not refunded to customers

The accommodation premise operator to account for the Service Tax collected and make payment to RMCD

 

The relevant Service Tax Policy can be accessed via the above link

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:

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)