Scope of taxation
Service tax is a consumption tax levied and charged on:
- any taxable service (including digital services) provided in Malaysia by a registered person in carrying on his business;
- any imported taxable services acquired by any person who carries on business in Malaysia; and
- any digital services provided by a foreign registered person to a Malaysian consumer.
Special treatment is given to transactions involving Designated Areas (Labuan, Langkawi, Tioman and Pangkor) and Special Areas (free zones, licensed warehouses, licensed manufacturing warehouses and Joint Development Area).
Taxable persons and taxable services
Examples of taxable services include but are not limited to the provision of accommodation premises, certain professional services, information technology services, digital services (including electronic platform services), certain telecommunication services, betting and gaming services, management services, consultancy services, training services, security services, provision of parking space, provision of golf course, golf driving range or services related to golf or golf driving range, courier delivery services (other than to destinations outside Malaysia), domestic flight services, provision and issuance of charge card or credit card whether or not annual subscription or fee is imposed, and provision of electricity to domestic consumer. Taxable services also include sale or provision of food, drinks, alcoholic beverages, cigarettes, tobacco products, smoking pipes, electronic cigarettes and similar electric vaporizing devices, preparation of a kind (in form of liquid or gel and irrespective of whether or not containing nicotine) used for smoking through electronic cigarettes and electric vaporizing devices.
The following services were included as taxable services with effective from 26 February 2024:
Services at Karaoke centres;
Brokering and underwriting services other than those related to financial services;
Maintenance or repair services;
Logistics services, which includes the supply chain of logistic management services, warehousing or warehousing management services, freight forwarding services, port or airport services, shipping services, aviation services or cold chain facilities services, delivery, distribution or transportation of goods services.
A complete list of taxable persons and taxable services can be found in the First Schedule to the Service Tax Regulations 2018.
Rate of tax
Prior to 1 March 2024, the rate of service tax is 6% ad valorem for all taxable services and digital services except for the provision of charge or credit card services. Service tax for the provision of charge or credit card services is RM25 per year on each principal card or supplementary card.
W.e.f. 1 March 2024, the rate of service tax has increased to 8% ad valorem for all taxable services and digital services except for the following services at their respective rates as below:
Food and beverages services (excluding sale of alcoholic beverages) – 6%
Telecommunication services – 6%
Provision of parking place services – 6%
Logistic services – 6%
Provision of charge or credit card services – RM25
Registration
A taxable person is a person who is registered or liable to be registered for service tax. A person is liable to be registered if the total value of his taxable services for a 12-month period exceeds or is expected to exceed the prescribed registration threshold.
The following is a summary of taxable persons and their respective prescribed registration thresholds:
Group |
Taxable person |
Registration threshold (RM) |
A |
Operators of hotels, inns, lodging house, service apartment, homestay* |
500,000 |
B |
Operators of restaurants, bars, snack-bars, canteen, coffee house, food court or any place providing food and drinks whether eat-in or take-away* |
1,500,000 |
| Catering services providers | ||
C |
Operators of night-clubs, dance halls, cabarets and karaoke centres |
500,000 |
Operators of 1st, 2nd or 3rd Class Public House and 1st or 2nd Class Beer House |
||
Operators of approved health and wellness centres and massage parlours* |
||
D |
Operators of private clubs |
500,000 |
E |
Operators of golf course or golf driving range |
500,000 |
F |
Licensed operators of bettings, sweepstakes, lotteries, gaming machines or games of chance |
500,000 |
G |
Registered advocates, solicitors and syarie lawyers |
500,000 |
Registered public accountants |
||
Licensed or registered surveyors / registered valuers, appraisers and estate agents |
||
Registered professional engineers |
||
Registered architects |
||
Consultancy, training or coaching services provider* |
||
Information technology services providers* |
||
Management services providers* |
||
Employment services providers* |
||
Licensed private agencies |
||
Operators of online platform or marketplace |
||
| Maintenance or repair service providers* | ||
H |
Persons who are regulated by Bank Negara Malaysia and provide credit card or charge card services through the issuance of a credit card or a charge card |
Nil |
I |
Licensed insurers or takaful operators |
500,000 |
Licensed/registered persons providing telecommunication services and contents applications services |
500,000 |
|
Operators of parking space for motor vehicles |
500,000 |
|
Operators of motor vehicles service or repair centres |
500,000 |
|
Licensed courier service providers |
500,000 |
|
Hire-and-drive car and hire-car service companies |
500,000 |
|
Advertising (including digital advertising) service providers |
500,000 |
|
Providers of electricity transmission and distribution services |
500,000 |
|
Licensed airlines providing domestic flights* |
500,000 |
|
Brokering and underwriting services providers |
500,000 |
|
Cleaning services providers* |
500,000 |
|
| J | Providers of logistics services | 500,000 |
| Providers of delivery, distribution or transportation of goods, documents or packages services through the e-commerce platform | ||
| Licensed courier service providers | ||
Approved customs agents who provide services for the release of goods from customs control |
Nil |
*These are subject to some exclusions
Any person who is not liable to be registered for service tax may apply to the Director General (DG) of Customs for registration as a registered person.
Foreign digital service providers are liable to be registered if the total value of digital services provided to Malaysian consumers for a 12-month period exceeds or is expected to exceed the prescribed registration threshold of RM500,000.
Invoice
A registered person is required to issue an invoice with the prescribed particulars for the taxable services rendered. A foreign registered person is also required to do the same. However, the requirements are much more simplified. The prescribed particulars include description of the taxable or digital services provided, total amount payable excluding tax and amount of service tax. The invoice may be issued and sent electronically.
Payment of service tax by a registered person (bi-monthly)
Service tax is due when:
- payment is received for the taxable services rendered, or
- immediately after the 12th month from the date of provision.
Taxpayers may request to account for service tax based on the date of invoice via an application to the DG of Customs.
Service tax due is accounted for and payable to the Royal Malaysian Customs Department (RMCD) every 2 months (i.e. taxable period). The service tax return (SST-02) and payment is due by the last day of the month following the end of the taxable period. A taxable person can apply to the DG of Customs to vary the taxable period.
Late submission of returns or late payments of taxes will be subject to the following penalty rates:
10% penalty on the unpaid service tax amount for the first thirty (30) day period past when service tax is due;
an additional 15% penalty on the unpaid service tax amount for the second thirty (30) day period past when service tax is due; and
an additional 15% penalty on the unpaid service tax amount for the third thirty (30) day period past when service tax is due.
Payment of service tax on imported taxable service by a non-taxable person (monthly)
A non-taxable person is required to account for service tax on imported taxable services acquired in the course of business via an SST-02A form. The service tax is due at the earlier of the payment date or the date the invoice for the services is received. The SST-02A form and the payment of service tax must be made by the last day of the month following the month in which the service tax is due.
Payment of service tax by a foreign registered person (quarterly)
Service tax is due when payment is received for the digital services provided. The foreign registered person can apply to account for service tax based on invoice date.
The service tax that falls due during a taxable period (3 months) is payable to the RMCD by the last day of the month following the end of that taxable period. A foreign registered person can apply to the DG of Customs to vary the taxable period.
Refund of service tax on bad debts
A registered person or a person who has ceased to be a registered person can apply for a refund of service tax in relation to bad debts. The conditions for the refund application are that:
- the whole or part of the service tax paid has been written off as a bad debt; and
- all reasonable efforts have been made by the applicant to recover the service tax.
Intra-group services
Service tax is not applicable to the following transactions performed among companies within a qualifying group of companies, (i.e. subject to certain qualifying criteria):
- Provision of certain qualifying professional services in Malaysia by a registered person;
- Acquisition of certain qualifying professional services from overseas by a Malaysian business; and
- Provision of digital services by foreign service providers.
Exemption for specific business-to-business (B2B) services
Service tax registered businesses which provide certain taxable professional services, advertising services or logistics services are exempted from payment of service tax on the same professional services, advertising services or logistics services acquired from another service tax registered person subject to certain qualifying criteria.
Local service tax registered businesses which provide certain taxable professional services or advertising services are exempted from having to account for and pay service tax through the imported taxable service mechanism on the same professional services or advertising services acquired from foreign service providers, subject to certain qualifying criteria. In addition, local service tax registered businesses which provide digital services can claim refund of service tax paid on digital services acquired from foreign registered persons if the digital service acquired is the same as the digital service they provide.
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