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Malaysia – indirect tax guide

Malaysia – indirect tax guide

Explore the requirements and rules that apply to indirect taxes in Malaysia.

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General

Type of indirect tax:

Sales Tax and Service Tax were implemented in Malaysia on 1 September 2018, replacing Goods and Services Tax (“GST”).

Standard rate:

10% for Sales Tax and 6% for Service Tax.

What supplies are liable to the standard rate?

For Sales Tax, goods (other than petroleum products) which are not exempted from Sales Tax or not prescribed to be subject to Sales Tax at the reduced rate of 5%. 

For Service Tax, all services which are in the specific scope of Service Tax. The scope of Service Tax does not cover all services.

Are there any reduced rates, zero- rates or exemptions and if so, what do they apply to?

Goods exempted from Sales Tax include basic food (eggs, vegetables, cereals), pharmeceutical products and steel products. 

Goods which are subject to 5% Sales Tax include certain food (prepared fruits, vegetables and meats), printers and mobile phones. 

A specific Sales Tax rate (e.g. 0.30 Malaysian ringgits (MYR) per litre) is applicable to petroleum products. 

There are exemptions from Sales Tax for certain persons (e.g. registered manufacturers who acquire or import raw materials to be used in the manufacturing of taxable goods). 

For Service Tax, there is a fixed rate of MYR25 per annum for providing credit cards/ charge cards. 

There are exemptions from Service Tax for certain B2B services and certain intra-group services are excluded from Service Tax.

Sales Tax and Service Tax registration

Who is required to register and what is the threshold?

Any manufacturer of taxable goods with an annual sales value exceeding MYR500,000 is liable to register for Sales Tax.

Generally, any person who provides taxable services exceeding MYR500,000 in a 12-month period is liable to register for Service Tax, however exceptions apply. For instance, the registration threshold for the provision of food and beverages is MYR1.5 million and there is no registration threshold for certain other services (e.g. credit card/ charge card providers are liable to register for Service Tax, regardless of the amount of their sales).

Currently, an overseas company with no permanent establishment in Malaysia would not be liable to register for Sales Tax or Service Tax.

However, from 1 January 2020, foreign service providers of digital services to consumers in Malaysia exceeding MYR500,000 per year will be liable to register for Service Tax.

Is voluntary registration available for an overseas company or a fiscal representative?

No.

Is voluntary registration possible?

Yes.

Sales Tax and Service Tax compliance

What is the typical frequency of returns?

Every two months.

Sales Tax and Service Tax recovery

Are there any items that a registered business cannot recover Sales Tax and Service Tax on?

Sales Tax and Service Tax are non-recoverable (i.e. they are a cost to businesses whether registered or not).

Can an overseas company recover Sales Tax and Service Tax if it is not registered?

Not applicable.

How long does it typically take to obtain a Sales Tax and Service Tax refund following a return filing?

Not applicable.

Are there specific requirements for the content of invoices to be considered valid for Sales Tax and Service Tax purposes?

Yes, unless otherwise approved by the director general, invoices must contain:

For Sales Tax

  • the invoice serial number;
  • the date of the invoice;
  • the name, address and identification number of the registered manufacturer;
  • the name and address of the person to whom the taxable goods are sold;
  • a description sufficient to identify the taxable goods sold;
  • any discount offered;
  • for each description, distinguish the type of taxable goods, quantity of the taxable goods and the amount payable excluding sales tax;
  • the total amount payable excluding sales tax, the rate of sales tax and the total sales tax chargeable shown as a separate amount;
  • the total amount payable inclusive of the total of sales tax chargeable; and
  • any amount expressed in a currency other than ringgit shall also be expressed in ringgit at the selling rate of exchange prevailing in Malaysia at the time of sale of the taxable goods.

For Service Tax

  • the invoice serial number;
  • the date of the invoice;
  • the name, address and identification number of the registered person;
  • a description sufficient to identify the taxable services provided;
  • any discount offered;
  • the total amount payable excluding service tax, the rate of service tax and the total service tax chargeable shown as a separate amount;
  • the total amount payable inclusive of total service tax chargeable; and
  • any amount expressed in a currency other than ringgit shall also be expressed in ringgit at the selling rate of exchange prevailing in Malaysia at the time when the taxable services are provided.

There are additional requirements for a registered person providing taxable services to his customer who is entitled for exemption of Service Tax (B2B exemption).

Special indirect tax rules

Does a reverse charge or indirect tax withholding mechanism apply?

Yes, businesses are required to self-account for Service Tax on imported services which are in the scope of Service Tax.

Rulings

Is it possible to apply for formal or informal advance rulings from the tax authority?

Yes, a person may apply to the director general for an advance ruling.

Other indirect taxes

Are there any other indirect taxes that apply in the jurisdiction?

Other indirect taxes include the following:

  • excise duty
  • customs duty
  • windfall profit levy
  • cess
  • tourism tax
  • departure levy

Contacts

Sue Lynn Ng
KPMG in Malaysia
T: +60 3 7721 3388 ext 7271
E: suelynnng@kpmg.com.my

Disclaimer

All information within this guide is provided by KPMG professionals in Malaysia and based on information available as of September 2019.

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