Malaysia's new Sales and Service Tax, or SST, officially came into effect on 1 September, replacing the former Goods and Services Tax (GST) system and requiring Malaysian businesses to adjust to a new regime.
The 6% GST was only introduced to Malaysia in 2015, and the new SST is largely similar to the previous system - so much so, it's being called SST 2.0. The number of goods exempted from SST is ten times more than the old GST - a total of 5,443 items are exempted - and fewer businesses will have to pay the SST when compared with the GST, so it's important for businesses in Malaysia to seek advice from their accounting partner about compliance.
Malaysia's special designated areas - including Langkawi Island, Tioman Island and Labuan Federal Territory - are exempt from the service tax.
One expected benefit from the SST is a lower cost of living, as sales tax is charged just once by the manufacturer at the point of sale. Manufacturers will be forced to be more cost-effective in order to remain competitive. And with the service tax threshold for food and beverage increased to RM1.5 million per year, hawker centers, take away food vendors and small restaurants can now provide food at a lower cost. The SST is therefore expected to be more popular compared to GST.
What's required from business for the new SST?
When the GST Act was repealed, companies did not need to apply for deregistration. Companies do, however, need to submit their final GST returns within 120 days of the repeal, or by 28 December 2018.
Businesses in Malaysia should first assess if they are subject to SST. Manufacturers and service providers who were GST-registered have been identified and automatically registered under the new regulations. They should now be charging SST to customers. Your accounting partner should be able to advise if you have not been automatically registered, registration can also be done through the MySST system.
In general, a services provider providing a taxable service under the Service Tax Act 2018 must register when the value of taxable services for a 12-month period exceeds a threshold of RM500,000. The SST threshold for operators of restaurants, bars, canteens, cafes or any place that provides food and drinks, are subject to a RM1,500,000 threshold.
The Service Tax rate is fixed at 6%, and the list of services subject to it include hotels, insurance, gaming, legal and accounting services, employment agencies, parking, couriers, advertising, and electricity.
The Sales Tax is levied at the import or manufacturing levels, and companies with a sales value of taxable goods exceeding RM500,000 in a 12-month period are liable to be registered for the tax, which is levied at rates varying from 5% to 10% depending on the goods in question. Exempted from SST registration are tailoring, jewellers and opticians.
Companies who are SST-registered must file a report every two months; the first taxable period will be from September to October 2018. The SST-02 return must be submitted no later than the last day of the month following the end of the taxable period, which means first returns are due by 30 November 2018.
TMF Group in Malaysia
Businesses in Malaysia have a relatively short period in which to adjust to the new process, so it's best they work with a local partner on the ground who is up to speed with the changes and can help with implementation.
TMF Group in Malaysia is already working with clients to ensure their accounting systems and business processes are compliant with SST, to register if needed, and to help file returns. To speak to our local experts about how we can help your business in Malaysia, get in touch.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.