1. Service Tax - Increase of Tax Rate from 6% to 8%
The rate of Service tax will be increased from 6% to 8% effective from 1 March 2024. As a concession, the new rate will not apply to the following services (will remain at 6%):
Telecommunication services
Food and beverage
Vehicle parking space services
Logistics services
Companies providing taxable services should consider the implications on their service terms and contracts and inform their customers about the change in the service tax rate. Costs of business will also increase as such, it is important to assess the business costing and pricing accordingly.
2. Services Tax - Expansion of Scope of Taxable Services
The following services will be included in the scope of taxable services (detailed in First Schedule on the Service Tax Regulations 2018):
a. Karaoke center services
b. Delivery services
c. Brokerage and underwriting services for non-financial services such as brokerage for
ship and aircraft space, commodity and real estate
d. Logistics services
This is effective from 1 March 2024. These companies that accumulate RM500,000 in total value of taxable services over a 12-month period* must register with the Royal Malaysian Custom Department and charge Service Tax accordingly. The 12-month period consists of the current month plus the previous 11 months.
Companies providing these services should assess the implications on their current and future service terms with their clients, and review and upgrade their current documentation, accounting, and filing systems.
3. Capital Gain Tax
The newly introduced Capital Gains Tax (CGT), effective from 1 January 2024, will apply to profits generated by companies, limited liability partnerships (LLPs), trust bodies, and co-operative societies from specific types of transactions, including:
a. The sale of shares in unlisted Malaysian companies.
b. The sale of shares in foreign companies that either hold real estate (such as land or buildings) in Malaysia or possess shares in another subsidiary company.
c. The sale of capital assets located outside Malaysia, when the proceeds are remitted into Malaysia.
The Income Tax (Exemption) (No. 7) Order 2023, gazetted on 29 December 2023 granted a two-month exemption from 1 January 2024 and 29 February 2024, on sales of unlisted companies shares. However, this exemption does not apply to gains from share sales that are subject to tax as business income under Section 4(a) of the Income Tax Act 1967
4. Sales Tax - Low Value Goods (LVG)
Following regional trends, Malaysia will impose sales tax on LVG imported from abroad into Malaysia, effective from 1 January 2024. This tax applies to all goods (excluding cigarettes; tobacco products; intoxicating liquors; smoking pipes (including pipe bowls); electronic cigarettes and similar personal electric vaporizing devices; and preparation of a kind used for smoking through electronic cigarette and electric vaporizing device, in forms of liquid of gel, whether or not containing nicotine) valued at RM500 or less are bought into Malaysia by land, sea or air. Online sellers and online platforms with sales exceeding RM500,000 in 12 months must register under the amended Sales Tax Act.
The implementation of sales tax on imported low-value goods (LVG) is aimed at, addressing a loophole in the existing sales tax system. Previously, imports under RM500 were exempt from sales tax to facilitate customs clearance, giving online retailers an unfair advantage over local businesses.
Please visit https://mylvg.customs.gov.my/Home for more information.