The Royal Malaysian Customs of Malaysia (RMCD) published a draft guide on transitional rules on 7 February 2024 with respect to changes of service tax rate from 6% to 8%.
Please note that the draft guideline does not apply to a foreign registered person providing digital services. Additionally, the guideline is in a draft stage subject to review by the Ministry of Finance. The relevant legislation has yet to be gazetted.
Overview
The service tax rate will be amended from 6% to 8% effective 1 March 2024 except for the following categories of services:
- Food and beverages
- Telecommunication services
- Parking
- Logistics
The following are the proposed additional taxable services:
| Description | Grouping | Service tax rate |
| Services of karaoke centres | C | 8% |
| Maintenance and/or repair services | G | 8% |
| Brokerage and underwriting services other than financial services | I | 8% |
| Logistics services | J | 6% |
Maintenance and/or repair services
Maintenance and repair services has been included as taxable services in Group G of the first schedule of the Service Tax Regulations 2018.
The new category includes maintenance management, corrective maintenance, preventive maintenance, calibration, adjustment, recondition, reconfigure or overhaul except for:
- maintenance management services related to land or building for the use of residential provided by any developer, joint management body, management corporation or residential association
- repair services on the residential building.
Logistic services
The provision of logistic services has also been introduced as a taxable services. It essentially covers the provision of logistic services including all delivery, distribution or transportation of goods services including courier services of documents, packages or goods except delivery of food and beverages.
The term “logistic” has been broadly defined as it covers all or part of the supply chain of logistic management services, warehousing or warehousing management services, freight forwarding services, port or airport services, shipping services, aviation services or cold chain facilities services.
Taxable services
The determination of service tax rate is essentially based on the date of provision of services. In other words, 6% is applicable for taxable services provided before 1 March 2024; 8% is applicable for taxable services provided after 1 March 2024.
Where taxable services span across 1 March 2024, it should be apportioned accordingly.
Exception
There is an exception rule provided where invoice has been issued before 1 March 2024 at 6% and payment is received before 1 March 2024, then the applicable tax rate would remain at 6% even though services are only provided after 1 March 2024. Otherwise, the taxpayer should collect the additional 2% (8%-6%) post 1 March 2024.
Imported taxable services
The application of service tax is based on the date when imported taxable services are received. In other words, 6% is applicable for taxable services received before 1 March 2024; 8% is applicable for taxable services received after 1 March 2024. Imported taxable services that span across 1 March 2024 should also be apportioned.
Exception
Where imported taxable services are to be received after 1 March 2024, the service tax rate of 6% can be applied where invoice has been received or payment made before 1 March 2024, whichever is earlier.
Please refer to the table below for further understanding:
