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Malaysia: Service tax on imported services, policy updates

Malaysia: Service tax on imported services, updates

Malaysian authorities issued three “service tax policies” as guidance about measures to address the potential cascading effect of the service tax on imported services.

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Service Tax Policy 7/2020 concerns accounting for service tax for persons otherwise exempt from paying service tax. Effective 1 January 2020, subject to certain conditions, those that are exempt from self-accounting for service tax on imported taxable services include:

  • Any person that, in carrying on a business, acquires digital services from foreign registered person
  • Any taxable person providing information technology services (ITS) having acquired those ITS from a person outside Malaysia

Service Tax Policy 8/2020 concerns group relief on providing taxable services to a company within the same group of companies. Effective 1 January 2020, the group relief facility may still be applicable with regard to taxable services provided to group members even if the same service is provided to a third party as long as the value provided to third parties does not exceed an amount equal to 5% of the total value of taxable services within a period of 12 months.

Service Tax Policy 9/2020 concerns the service tax treatment of taxable services under Group A: Accommodation (including hotels, inns, lodging houses, service apartments and other similar establishments that are exempted from charging service tax on taxable services provided from 1 March 2020 to 31 August 2020).

Read a March 2020 report prepared by the KPMG member firm in Malaysia

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