Updates on Indirect Tax - Sales Tax and Service Tax (Issue No. 3/2019)
We wish to inform that the Sales Tax (Amendment) Bill 2019 (Sales Tax Bill) and Service Tax (Amendment) Bill 2019 (Service Tax Bill) was released and passed on 8 April 2019 and the salient points extracted from the Bills are as follows:-
1) Introduction of new section – Section 27A of Sales Tax Bill and Section 27A of Service Tax Bill (Offsetting Unpaid Tax Against Refund)
The Director General (“DG”) may offset any amount or any part of any amount refundable under this Act to that person against the unpaid sales tax, service tax, goods and services tax (“GST”), customs duty or excise duty, etc. The DG shall treat the amount offset as payment or part payment received from that person.
2) Introduction of new section – Section 84A of Sales Tax Bill and Section 69A of Service Tax Bill (Imprisonment for Non-Payment of Fine)
This is to provide for the period of imprisonment to be imposed by any court in respect of non-payment of any fine, ranging from a period of 2 months and upwards depending on the amount of the unpaid fine.
3) Service Tax (Amendment) Bill 2019 (Effective from coming into operation of the Service Tax (Amendment) Act 2019)
• Introduction of New Definitions:
“Foreign Service Provider” means any person who is outside Malaysia providing any digital service to a consumer and includes any person who is outside Malaysia operating an online platform for buying and selling goods or providing services (whether or not such person provides any digital services) and who makes transactions for provision of digital services on behalf of any person.
“Consumer” means any person who fulfils any two of the following:
(a) makes payment for digital services using credit or debit facility provided by any financial institution or company in Malaysia;
(b) acquires digital services using an internet protocol address registered in Malaysia or an international mobile phone country code assigned to Malaysia;
(c) resides in Malaysia.
“Digital Service” means any service that is delivered or subscribed over the internet or other electronic networks and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.
• Timeframe for Issuance of Invoices:
Every registered person that provides taxable service is required to issue invoices within one year from the date the taxable service was provided, or such extended period as may be approved by the DG.
4) Introduction of New Part – Part IXA Digital Services (Effective from 1 January 2020)
• Service Tax shall be charged and levied on any digital service provided by a foreign registered person to any consumer and the proposed rate of tax is 6%.
• A foreign service provider is liable to be registered if his total value of digital services provided to consumers has exceeded the prescribed threshold of RM500,000. He is required to apply for registration before 1 January 2020, commencing from 1 October 2019.
• The foreign registered person has to submit the return form every 3 months according to the taxable period. The return form has to be submitted (regardless of whether there is any tax to be paid or not) electronically not later than the last day of the following month after the taxable period ended.
• Every foreign registered person who provides any digital services shall issue an invoice or a document containing prescribed particulars to the consumer in respect of the transaction either electronically or in paper form.
• The value of digital services on which the service tax is payable shall be the value charged by the foreign registered person.
• The service tax charged on the digital service provided to the consumer shall be due at the time when the payment for the digital service is received by the foreign registered person.
• Any foreign registered person who commits an offence and shall, on conviction, be liable to a fine not exceeding RM50,000 or imprisonment for a term not exceeding 3 years or both.
• Any foreign registered person who failed to make payment for any service tax due within the stipulated time frame shall be liable to the following penalties:
We will keep you updated on any further guidelines and announcements to be issued by the Royal Malaysian Customs Department or other relevant authorities, if any.
For any enquiries or assistance, please contact any of the following in this office:
Mr Anand Chelliah
Managing Partner, Tax Services
Asia Pacific Tax Leader
Ms Sandra Saw
Associate Director (Corporate Tax & Sales Tax and Service Tax), Tax Services
or call 03 - 2297 1000.