Service Tax Updates

It was announced in October 2023 that the service tax would be widened as follows effective from 1st March 2024:

  1. The general service tax rate to increase from 6% to 8% (save for certain services maintained at 6%); and
  2. Tax is imposed on new taxable services.

We sent mailer alerts on this in October 2023 and early last month, but some of the changes that were introduced in the last 10 days were unexpected. Numerous legal amendments have been enacted, accompanied by extensive guidance spanning hundreds of pages.

Hence, this mailer alert concisely present the changes and the practical effective dates:

Transitional aspects on services spanning, advance payments etc. are largely in line with our e-Alert on 08th February 2024.

Below is an extract from this week’s Edge business and investment weekly authored by us to illustrate the impact of the new addition to taxable services:

For full comments, do get this week’s Edge from the newsstand. You may also register for our timely technical webinar on 7th March (this Thursday); click here for details.

What should businesses do next?

While the summary above provides an insightful, pragmatic overview, it certainly cannot capture all the changes over the last 10 days – comprising hundreds of pages of technical documents released by Attorney General’s Chamber, Ministry of Finance and Customs.

Amid the short period of time, businesses should do the following diligently to be in compliance with the relevant law:

  1. Prepare a transaction-by-transaction compliance assessment given the additions and changes on the scope of taxable services.
  2. Evaluate the potential application of the various exemptions and rules to avoid double/multiple taxation. Pay careful attention to the exemption conditions.
  3. Plan for the transitional matters, and engage in proper stakeholder communication.
  4. Quantify the impact on business in terms of pricing and be in compliance with the anti-profiteering provisions.

The contents of this mailer are of generic nature. Strictly no liability assumed. For case-specific consultancy and professional support on the implementation of the new rules, do reach out to your contact point at TRATAX or email us at corp@tratax.my.