Service Tax Policy 4/2024 (Amendment No 1)

The Royal Malaysian Customs Department (“RMCD”) has issued an update to Service Tax Policy 4/2024 (Amendment No 1) dated 23 August 2024 in relation to logistic services. 

Please click on the above header link for a copy of the Service Tax Policy (only available in Malay language). 

We have prepared a summary of the changes as follows:

Designated Areas and Special Areas [paragraph 2(iii)]

All logistic services under Group J, First Schedule of the Service Tax Regulations 2018 provided within/ between designated areas and special areas are not subject to Service Tax.

However, any person whose principal place of business is located in Malaysia and provides logistic services in a designated area or special area or any person whose principal place of business is located in a designated area or special area and provides logistic services to customers whose principal place of business is in Malaysia are subject to Service Tax.

Door to door delivery services [paragraph 2(v)(a)]

The conditions for the Service Tax exemption on door to door delivery services have been updated (as underlined) as follows:

i)  Goods delivery services from a place outside Malaysia to a place within Malaysia or from a place within Malaysia to a place outside Malaysia without going through a third party, that is provided by the delivery service provider to the customer. The delivery service provider is also allowed to engage the services of third parties in providing the delivery services

ii) Goods delivery services by the same service provider to the recipient

iii) The goods delivered using the same airway bill/ bill of lading / consignment note / delivery order to the recipient

iv) Single billing invoice – same invoice for the delivery charges from the service provider to the recipient

The above door to door delivery services are exempted from Service Tax pursuant to Section 34(3)(a) and 34(4) of the Service Tax Act 2018.

Transit activities [paragraph 2(v)(b)]

Logistic services related to transit activities, i.e. goods that arrive from a place outside Malaysia to Malaysia without being break bulk and then to another place outside Malaysia through land / sea / air transport modes are exempted from Service Tax pursuant to Section 34(3)(a) and 34(4) of the Service Tax Act 2018.

Please note that the abovementioned updates to the Service Tax Policy 4/2024 takes effect from 1 March 2024. 

Our observations

The above updates signifies that the Ministry of Finance and the Royal Malaysian Customs Department are continuously engaging and listening to industry players with the aim to improve the current Service Tax regime. Particularly, the relaxation to the conditions for the door to door delivery services Service Tax exemption is indeed a welcome news not only to businesses, but also to the rakyat. Affected businesses are advised to review their transactions to assess whether these updates have an impact to their operations.

Evelyn Lee
Partner
evewflee@kpmg.com.my
+603 7721 2399

Crystal Chuah Yoke Chin
Associate Director
ycchuah@kpmg.com.my
+603 7721 2714

Regina Lau
Partner
reglau@kpmg.com.my
+603 7721 2188

Titus Tseu
Executive Director 
titustseu@kpmg.com.my
+603 7721 2822

Ng Fie Lih
Partner 
flng@kpmg.com.my
+603 7721 2514