Indirect Tax - Service Tax & Sales Tax
Service Tax
Service Tax is a form of
indirect tax imposed on specified services called "taxable
services". Service tax cannot be levied on any service which is
not included in the list of taxable service.
A service tax applies to
certain prescribed goods and services in Malaysia including food, drinks and
tobacco; provision of rooms for lodging and premises for
meetings, conventions, and cultural and fashion shows; health
services, and provision of accommodation and food by private
hospitals.
The tax also applies to professional and
consultancy services provided by accountants, advocates and
solicitors, engineers, architect, surveyors (including valuers,
assessors and real estate agents), advertising agencies,
consultancy firms, management service provider, insurance
companies, motor vehicle service and repair centres,
telecommunication services companies, security and guard services
agencies, recreational clubs, estate agents, parking space
services operators and courier service firms.
However, professional services provided
by a company to companies within the same group will be exempted
from the current service tax of 6%. Courier services provided
from a point within Malaysia
to a destination outside
Malaysia
will also be exempted from the service tax of 6%.
Generally, the imposition of service tax
is subject to a specific threshold based on an annual turnover
ranging from RM150,000 to RM500,000.
Sales Tax
Sales tax is a single stage tax imposed at
the import or manufacturing levels. In
Malaysia, manufacturers of
taxable goods are required to be licensed under the Sales Tax Act
1972. Companies with a sales turnover of less than RM100,000 and
companies with Licensed Manufacturing Warehouse(LMW) status are
exempted from this licensing requirement. However, companies with
a sales turnover of less than RM100,000 have to apply for a
certificate of exemption from licensing.
Licensed manufacturers are taxed on their
output while manufacturers that are not licensed or exempted from
licensing need to pay tax on their inputs. To relieve small-scale
manufacturers from paying sales tax upfront on their inputs, they
can opt to be licensed under the Sales Tax Act 1972 in order to
purchase tax-free inputs. With this, small-scale manufacturers
can opt to pay sales tax only on their finished products.
Sales tax is generally at 10%. However,
raw materials and machinery for use in the manufacture of taxable
goods are eligible for exemption from the tax, while inputs for
selected non-taxable products are also exempted.
Certain non-essential foodstuffs and building
materials are taxed at 5%, general goods at 10%, liquor at 20%
and cigarettes at 25%. Certain primary commodities, basic
foodstuffs, basic building materials, certain agricultural
implements and heavy machinery for use in the construction
industry are exempted. Certain tourism and sports goods, books,
newspapers and reading materials are also exempted.
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