(Tax Update) Service Tax Increase To 8%

We discuss the service tax rate will increase from 6% to 8% on all taxable services with effect from 1 March 2024, except for F&B, telecommunication services, vehicle parking space services and logistic services.

The scope of service tax will also be widened to include karaoke centre services, delivery services, brokerage and underwriting services, logistics services as well as repair and maintanence, effective 1 March 2024.

01Key Summary

02Service Tax Rate Increase

• Starting from 1 March 2024, the service tax rate will go up to 8%.
• Some services like food, beverages, telecom, parking, and logistics will still be taxed at 6%.
• Credit card fees will stay at RM25 per card per year.
• Other services like accommodation, clubs, and professional services will be taxed at 8%.

03Transition Rules for the Tax Increase

• Services provided before 1 March 2024, will be taxed at 6%, but services after that date will be taxed at 8%.
• If a service spans 1 March 2024, part of it will be taxed at 6% and the rest at 8%.
• Payments made before 1 March 2024, for services after that date will be taxed at 6% if provided within six months, and 8% if provided after six months.
• Special rules will apply to businesses offering services taxed at different rates.

04Transition Rule Table

05Expansion of Taxable Services

• New services like karaoke centers, brokerage, and logistics will be taxed.
• Logistics services involve managing the movement and storage of goods and information efficiently.
• Some services like food delivery and transshipment won't be taxed.
• Businesses providing logistics services to other businesses will be exempt from tax.

06Expansion of Taxable Services - Repair & Maintenance

Royal Malaysian Custom Departments released the Service Tax guidance for maintenance or repair services in Malaysia, as of February 26, 2024. Key points include:

• Introduction of service tax on maintenance or repair services under the Service Tax Act 2018 from September 1, 2018.
• Mandatory registration for providers exceeding a threshold, with a focus on maintenance or repair services.
• Details on taxable and exempt services, including specific examples.
• Clarification on the tax treatment of various maintenance and repair activities.
• Guidelines for service providers on registration, tax imposition, and compliance requirements. The government has unexpectedly decided to expand the scope of the sales and service tax (SST) to include almost all types of repair and maintenance jobs.
• Maintenance management services related to residential land or buildings provided by developers, joint management bodies, management corporations, or residential associations are not subject to service tax.

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