Malaysia: Transitional rules for proposed increase in service tax rate
The transitional rules are proposals and still under review by the Minister of Finance.
The transitional rules are proposals and still under review by the Minister of Finance.
The Royal Malaysian Customs Department (RMCD) on 22 January 2024 held a meeting to discuss transitional issues regarding the previously announced proposed increase in service tax rate effective 1 March 2024. Read TaxNewsFlash
Transitional rules for the proposed increase in service tax rate include:
- The service tax treatment for transitional purposes are categorized into three broad categories:
- Taxable service provided in full before effective date
- Taxable service provided in full post effective date
- Taxable service provided spanning effective date
- Businesses need to identify the categories (mentioned above) as different service tax treatment would apply depending on the accounting basis (payment or invoice basis).
- Generally, the taxable services provided before effective date would be subject to service tax at the rate of 6%, whereas taxable services provided post effective date would be subject to service tax at the rate of 8%.
- Special facility (i.e., service tax rate remains at 6%) is provided for situations when the service tax is due before the effective date, and such taxable services are provided between 1 March 2024 and 31 August 2024.
These transitional rules are proposals and still under review by the Minister of Finance.
Read a January 2024 report prepared by the KPMG member firm in Malaysia
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