Explore the requirements and rules that apply to indirect taxes in Malaysia.
Sales Tax and Service Tax were implemented in Malaysia on 1 September 2018, replacing Goods and Services Tax (“GST”).
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.
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?
Is voluntary registration possible?
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?
How long does it typically take to obtain a Sales Tax and Service Tax refund following a return filing?
Yes, unless otherwise approved by the director general, invoices must contain:
For Sales Tax
For Service Tax
There are additional requirements for a registered person providing taxable services to his customer who is entitled for exemption of Service Tax (B2B exemption).
All information within this guide is provided by KPMG professionals in Malaysia and based on information available as of September 2019.