The Sales and Service Tax Malaysia – also commonly referred to as SST Malaysia – came into effect on 1 September 2018 last year. With the introduction of the SST, the previous unpopular Goods and Services Tax (GST) in Malaysia was repealed.
While the GST formerly implemented a 6% tax rate in Malaysia on several goods and services, the SST tax regime system works differently. The Sales and Service Tax (SST) is set to essentially model the old SST system, which was effective in Malaysia before the GST was brought on board. However, there will be some new changes introduced to the new system.
The announcement of the new SST tax regime was a significant one for Malaysia. After the new government came into power and announced that SST was going to come into effect beginning 1 September 2018, the GST tax which was ongoing at that time was zero-rated. It meant that businesses and citizens enjoyed a 90-day tax holiday during that period until 1 September approached, although they were still required maintain their compliance requirements.
How SST in Malaysia Works
Since the SST system in Malaysia is a single-stage tax system, this means that goods which are sold and manufactured by a taxable person(s) in Malaysia will be charged a taxable amount. Anyone in Malaysia who provides taxable services in Malaysia are considered taxable persons. The export of goods which are manufactured will not be subjected to sales tax.
SST returns in Malaysia must be submitted to the Royal Malaysian Customs Department (RMCD) on a bi-monthly basis. You must keep all the relevant records of your SST submission to the RMCD for at least 7-years for record purposes. You may choose to keep these records either in English, or Bahasa Malaysia.
Malaysia’s SST system models a single-stage tax system, whereby the sales ad valorem tax is charged on goods sold and manufactured by individuals or businesses who are considered taxable in Malaysia. Any taxable goods which are imported into Malaysia will also be SST applicable.
The Difference Between SST and GST in Malaysia
Here is the difference between the former GST system in Malaysia and the new SST system which is currently being enforced:
|GST in Malaysia||SST in Malaysia|
|Introduced in Malaysia on 1 April 2015 (announced during the Budget 2014)||Implemented in Malaysia since the 1970s before being replaced briefly by the GST. SST has undergone a few changes and improvements since then|
|Tax was imposed on each level of distribution (manufacturers, wholesalers, retailers, consumers). However, paid input taxes are claimable by businesses||Only imposed on the manufacturer and consumer level|
|Enabled the curbing of transparency, misappropriation and tax-payment issues||Certain importers, manufacturers, wholesalers or retailers could fail to declare their taxes through transfer pricing|
|The standard charge for GST rates was 6% (it’s not an added tax) |
|Tax rates may vary from 5% to 10% (multiple rates covering different categories of goods and services)|
|Advantage of this tax is that it is business friendly, and input tax is available upon receipt of the tax invoice||Advantage of SST compared to GST is that it is simple, straightforward, no refund issues for business operators, people friendly and it has a focused, narrow scope|
|Disadvantage includes wide coverage, comprehensive, refund issues, eventually imposed on prices sold to the customer, despite having input tax credit, which resulted in cascading prices||Disadvantage that it is a cost to business, and deductions are based on sales (matching principles)|
Scope of Taxable Services in Malaysia
In Malaysia, taxable services include the following industries:
- Food and beverage preparation
- Employment agency
- Parking and hire car services
- Credit cards
- IT services
- Consultancy services
- Management services
- Insurance and Takaful services
- Legal and accounting services
- Courier and forwarding services
- Pay TV services
- Motor vehicle repairs
If your businesses taxable goods and service value is exceeding the RM500,000 threshold within a 12-month period, you will be required to register for SST. If you’re operating a manufacturing or import company and your goods are not exempted under the SST, you will be required to pay a sales tax of either 5% or 10%.
Registering for SST in Malaysia
Businesses in Malaysia can register for SST via the MySST system, and all applications will be approved within a 24-hour timeframe if you were an existing GST registrant. If your documents require a verification process, the approval may take slightly longer.
If your business was previously registered under the GST system, you will automatically be liable for the SST registration. Your company may also apply for voluntary registration if your manufactured goods are taxable and below the threshold.
SST in Malaysia must be prepared by companies on an accrual basis. If your company sells taxable goods, you must issue invoices which contain the prescribed particulars must be either in English or Bahasa Malaysia. Once again, all records must be kept in Malaysia for at least 7-years. If you want to keep your records abroad, you must acquire approval from the Director General before you can do so. Records can be kept in either hardcopy or softcopy.
Making the Transition to SST
Businesses who were under the previous GST tax regime were given time when it came to claiming input tax after the SST was introduced. The timeframe for making those claims was 4-months from the date of the SST introduction. Businesses also had to declare their output tax in their final GST-03 return form.
Paul Hype Page & Co. will give you more information and assistance on policy updates, compliance regulations and changes to tax conditions. Corporate tax in Malaysia.
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IRB (Inland Revenue Board) governs Malaysia’s tax system, helps develop a stronger economy, better environment and a more vibrant economy. All companies, regardless of industry, have a legal duty to pay taxes.
Malaysia attracts investments from around the world by reducing its corporate income tax rate and introducing different tax incentives. Malaysia has one of the lowest corporate tax rates in the world.
As your company’s Tax agent , Paul Hype Page & Co Chartered Accountant will be fully responsible for the practice of ensuring that these conditions are met. It is important that we be highly qualified and well versed in local regulations and corporate laws, as we are responsible for the upkeep of important company files, tax reports and tax records.