Taxation is a common term for businesses and individuals, with every country imposing their own tax systems. Each country’s tax system has their own benefits and disadvantages – let’s take a look at the Sales and Services Tax in Malaysia, which is required for businesses in Malaysia.
What is Sales and Service Tax?
Sales and Service Tax Malaysia (SST) comprises of 2 separate taxes.
Sales tax The Sales Tax is a single-stage tax which is imposed at import and production levels.
Service tax The Services Tax is an indirect tax which is imposed on any taxable service which has been provided by a taxable individual in Malaysia and was provided in the name or with the approval of a company.
SST was reinstated on 1 September 2018, the tax system administered tax rates ranging from 5% to 10%. This was modified in hopes to increase disposable income of the population due to the lower cost of goods and services. The SST was the tax replacement for GST, which was abolished in June 2018.
How the Sales and Service Tax in Malaysia Works
As the SST system in Malaysia is a single-stage tax system, goods which are sold and manufactured by a taxable person(s) will be charged a taxable amount. There is an exception for export of goods which are manufactured, 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 to the RMCD must be kept for at least 7-years for record purposes and these records can be either 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 because the seller pays the sales tax at the point of sale only once.
ADVICE: Producers and service providers who are uncertain of their status pertaining to SST should take a closer look at the regulations for further information!
Difference between Sales and Services Tax and GST in Malaysia
Here are the differences between the former GST system in Malaysia and the new SST system which is currently being enforced:
GST in Malaysia
SST in Malaysia
Effective in Malaysia on 1 April 2015
Implemented in Malaysia since the 1970s until replaced by GST in 2015-2018, and reintroduced with modifications in 2018
Tax was imposed on each level of distribution (manufacturers, wholesalers, retailers, consumers).
Only imposed on the manufacturer and consumer level
Paid input taxes are claimable by businesses
No Input Tax credit system for Taxes encountered.
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
Disadvantages include wide coverage, comprehensive, refund issues, eventually imposed on prices sold to the customer, despite having input tax credit, which resulted in cascading prices
Disadvantages are that it is a cost to business, and deductions are based on sales (matching principles)
FUN FACT: Since SST is only a single-stage tax, SST 2.0 is expected to only have less than 90,000 registered businesses as compared to 472,000 registered businesses under GST.
Scope of Taxable Services in Malaysia
In Malaysia, taxable services include the following industries:
Food and beverage preparation
Parking and hire car services
Insurance and Takaful services
Legal and accounting services
Courier and forwarding services
Pay TV services
Motor vehicle repairs
It would be required to register for SST if your businesses taxable goods and service value is exceeding 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%.
Registering for Sales and Services Tax in Malaysia
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 and 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.
Making The Transition to Sales and Services Tax
Businesses who were 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.
If you are unsure of the tax system in Malaysia, reach out to as to be your trusted tax agent, who can provide you with tax advice, planning, and more! Contact us now for a free consultation.
The Sales Tax is only imposed on the manufacturer level, the Service Tax is imposed on consumers that are using tax services. SST rates are less transparent than the GST which had a standard 6% rate, the SST rates vary from 6 or 10%.
What can Paul Hype Page & Co offer to help?Tommy2021-09-17T16:05:18+08:00
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.
Is Malaysia an attractive country for Investment?Tommy2021-09-17T16:04:48+08:00
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.