How Can We Help?

SST – 6% or 8%

You are here:
< All Topics

Draft Transitional Rules for The Change in Service Tax from 6% to 8%

From 1st March 2024, Malaysia’s service tax rate will rise from 6% to 8% on all existing taxable services except  food and beverage services;  telecommunication services; and parking space provision service. The Royal Malaysian Customs Department (RMCD) has issued a draft Guide on Transitional Rules  on 7 Feb 2024 to  to clarify how to determine the service tax rates during transitional period. Please note that the guideline is still under review by the Ministry of Finance until related legislation is gazetted.

SST - 6% or 8% ?

The tax rate for taxable services is determined based on the date the service is provided.

Services Provided Before 1st March 2024

If the entire taxable service is provided before 1st March 2024, the tax rate is 6%, regardless of when the payment is received.

Services Provided On/After 1st March 2024

For services provided on or after 1st March 2024, the tax rate determination depends on when the payment is received:

  • If the entire payment is received before 1st March 2024, the tax rate is 6%;
  • If the entire payment is received on or after 1st March 2024, the tax rate is 8%;
  • If partial payment is received before and on/after 1st March 2024, the service is taxed at a rate of 6% for the portion received before 1st March 2024 and 8% for the portion received on or after 1st March 20241.
Flow chart explaining the transitional period for Malaysia’s Service Sales Tax (SST) rate change from 6% to 8% effective from 1st March 2024, based on the Royal Malaysian Customs Department’s draft guide.
Examples from the draft guide by Royal Malaysian Customs Department illustrating the transition from a 6% to an 8% SST rate in Malaysia, effective from March 1, 2024, based on when services were performed and payments were received.

Services Spanning 1st March 2024

For services that span over the 1st of March 2024,  the service tax rate is applied by apportionment: 

  • The portion of the service provided before the effective date is subject to the old service tax rate of 6%.
  • The portion of the service provided on or after the effective date is subject to the new service tax rate of 8%.
  • This apportionment applies regardless of the tax accounting basis, whether it’s a payment basis or invoice basis.
  • Any payments received before the effective date for any services provided on or after the effective date are subject to the old tax rate of 6%.
Flow chart to determine Service Tax Rate for taxable services spanning 1 Mar 2024, based on the Royal Malaysian Customs Department’s draft guide.
Examples from the draft guide by Royal Malaysian Customs Department illustrating the transition from a 6% to an 8% SST rate in Malaysia, for services spanning 1 Mar 2024 based on when services were performed and payments were received.

Next Steps

After understanding the SST transitional rules, here are some actions you might consider:

  1. Review Your Services: Identify which of your services will be affected by the change in tax rate. This includes services that will be provided over the transition period.

  2. Update Your Systems: Ensure your accounting and billing systems are updated to apply the correct Service Tax rate based on the date of service provision and the date of payment receipt.

  3. Communicate with Customers: Inform your customers about the change in Service Tax rate and how it will affect the cost of your services. This can help avoid confusion and disputes over billing.

  4. Train Your Staff: Make sure your staff are aware of the changes and understand how to apply the new Service Tax rates. This is particularly important for staff who handle billing and customer service.

  5. Consult Yau & Co.: If you’re unsure about any aspect of the new rules, consider consulting with us at Yau & Co. We’re here to help you navigate these changes and ensure your business remains compliant with the new tax laws.

Reference

Draf Panduan Peralihan Perubahan Kadar Cukai Perkhidmatan

Table of Contents
Top
error: Content is protected !!