Malaysia – Lovat Compliance

Malaysia

Goods

The analog of VAT in Malaysia is Sales tax.

Sales tax standard rate

The standard Sales tax rate in Malaysia in 2024 is 10%.

Reduced rate

A reduced rate of 5% applies to certain products, including food, pharmaceutical goods, base metals, and others.

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Increased rate

An increased rate of 20% applies to the certain food preparations.

Goods Exempted from Tax

Books, newspapers, magazines;
Meat, milk, eggs, vegetables, fruits, bread;
Fish, seafood;
Bicycles including certain parts and accessories;
Pharmaceutical products such as medicine, medical cream, cough syrup, bandage, medicaments containing multivitamins & minerals, etc.;
Articles of goldsmith such as gold or platinum jewellery, silver tableware, etc.;
Goods produced for export.

Import of low-value goods

In Malaysia, the concept of low-value goods (LVG) was introduced on 1 April 2023. Import of goods with a value below RM500 ($110) is the import of low-value goods. Shipping costs if indicated separately are not included in the tax base for sales tax calculation.

Sales tax registration threshold

The Malaysian VAT registration threshold is RM 500 000 which is approximately $110,000. This threshold is applied to local and foreign companies which import LVG or sell locally. Threshold is calculated for each 12-month period.

Marketplaces

International marketplaces are required to register as sales taxpayers if the total value of imports to Malaysia for 12 months has reached the amount specified in the threshold section. Marketplaces in this case must calculate and withhold sales tax on their platform. Marketplace facilitator rules effective in Malaysia since 1 April 2023.

Registration procedure

In Malaysia, a company can register for sales tax online through the MySST system. In MySST, a taxpayer is required to submit an individual application in case this company did not receive notification of registration.

If foreign company registers for special LVG scheme it is assigned with LVG Registration Number. This number needs to be indicated in each import declaration or the consignment note (CN).

Tax representative

Tax representatives are not required in Malaysia.

Sales tax filing

The tax period for taxpayers registered for the LVG scheme is a quarter. Deadline for filing LVG sales tax return is the last day of the month following the reporting period.

The standard sales tax period in Malaysia is two months. Deadline for filing standard ST return is the last day of the month following the reporting month.

Sales tax payment deadlines

The deadline for sales tax payment coincides with the deadline for submitting the sales tax return. The tax return can be submitted and payment can be made by mail or online. If paper form is chosen, it needs to be sent to the Customs Processing Center (CPC). If payment of sales tax is made electronically, it needs to be done through the MySST system.

Penalties

There are penalties for late payment:

10% of the sales tax applies in the first 30-day period;
15% of the sales tax applies in the second 30-day period;
15% of the sales tax applies in the third 30-day period.

After these deadlines, a penalty of 40% applies.

Keeping records

Company must keep tax records in English or Bahasa Melayu language for a period of seven (7) years from the latest date to which the record relates.

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Digital

The local name for VAT for digital services in Malaysia is Service Tax.

Service Tax rate

Service tax standard rate in Malaysia is 8% from March 1, 2024, which applies to digital services provided by foreign businesses to the customers in Malaysia. B2B professional services are exempt from the Service tax in Malaysia.

Service Tax registration threshold

Non-resident businesses which provide digital services to consumers in Malaysia must register for Service tax purposes if their annual turnover exceeded RM 500,000 (approx. EUR 98,000), or expected to be so.

Pieces of evidence

Services tax is payable at the place of supply. The territory of Malaysia is deemed to be the single place of supply of services. The time of supply in Malaysia is the the moment the price is paid (in whole or in part), or when transaction is registered by the service provider.

Service tax on services imported is due at the earliest of the date of payment or invoice received.

E-services list

Software, application & video games (e.g., downloading of online software, online gaming);
Music, e-book and films (e.g., supply of music, streaming services, include subscription-based media);
Advertisement and online platform (e.g., offering online advertising space on intangible media platform, offering platform to trade products or services);
Search engines and social networks (e.g., customised search-engine services);
Internet Based Telecommunication;
Database and hosting (e.g., website hosting, online data warehousing, file-sharing and cloud storage services);
Online training (e.g., supply of distance learning, e-learning, online courses, pre-recorded webinars);
Others (e.g., subscription to online newspapers and journals, provision of other digital content like images, text, information and payment processing services).

Registration procedure

Non-resident digital service providers who are liable to be registered for SToDS must apply for registration electronically using the DST-01 Form on the MYSToDS portal.

Service Tax returns filing and payment date

Service tax returns in Malaysia must be submitted electronically on quarterly basis. The deadline for filing and payment is the last day of the month following the reporting period.