Sales and Services Tax in Malaysia

Taxation is a common term for businesses and individuals, with every country imposing its own tax systems. Each country’s tax system has its own advantages and disadvantages – let’s take a look at the Sales and Services Tax (SST), which is required for businesses in Malaysia.

Sales and Service Tax Malaysia (SST) consists of 2 separate taxes:

SST was reinstated on 1 September 2018, and the tax system administered tax rates ranging from 5% to 10%. This was modified in hopes to increase the disposable income of the population due to the lower costs of goods and services. The SST was the tax replacement for GST, which was abolished in June 2018.

As the SST system in Malaysia is a single-stage tax system, goods sold and manufactured by a taxable person will be charged a taxable amount. There is an exception made for the export of goods manufactured, where they 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 and relevant records of your SST submission must be kept for at least 7-years for record purposes. These records can either be in English or Bahasa Malaysia.

Goods sold and manufactured by individuals or businesses who are considered taxable in Malaysia will be subjected to sales and valorem tax, including any taxable goods which are imported into Malaysia.

With the introduction of SST, Malaysia enjoyed the advantage of a lower cost of living as sellers pay sales tax at the point of sale only once.

Here are the differences between the former GST system in Malaysia and the new SST system which is currently being enforced:

In Malaysia, taxable services include the following industries:

• Advertising
• Hotels
• Food and beverage preparation
• Employment agency
• Parking and hire car services
•  Telecommunications
•  Surveyance
• Valuation
• Architectural
• Engineering
• Credit cards
• Electricity
• IT services
• Consultancy services
• Management services
• Insurance and Takaful services
• Legal and accounting services
• Courier and forwarding services
• Pay TV services
• Gaming
• Clubs
• Motor vehicle repairs

It would be required to register for SST if your business’s taxable goods and service value exceeds the RM500,000 threshold within a 12-month period. However, 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%.

If you have a business in Malaysia, you are required to register for SST via the MySST system. All applications will be approved within a 24-hour timeframe if you were an existing GST registrant. In the case that your documents require a verification process, the approval may take slightly longer.

You will automatically be liable for the SST registration if your business was previously registered under the GST system. You 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 and records must be kept in Malaysia for at least 7 years as well. If you would like to keep your records abroad, you must acquire approval from the Director General before you can do so and records can be kept in either hardcopy or softcopy.

Businesses under the previous GST tax regime were given time when it came to claiming input tax after the SST was introduced this timeframe was 4 months from the date of the SST introduction. Businesses are required to declare their output tax in their final GST-03 return form.

Note that even when there is no tax to be paid, the SST return must still be filed. The taxable period for it is every 2 months. The SST payment must be made within 30 days from the end of the taxable period

The SST can be filed by downloading the Form SST-02 from the MySST portal and mail it to the Customs Processing Centre (CPC) by post. It can otherwide be done online through the CJP system.