Malaysia: Proposed increase in service tax rate and expansion of taxable services effective 1 March 2024
Proposals to increase the service tax rate to 8% and expand the scope of service tax
The Royal Malaysian Customs Department (RMCD) announced in a recent sales tax and service tax webinar a proposed increase in the service tax rate to 8% (from 6%) and a proposed expansion of the scope of service tax—effective 1 March 2024.
Under the proposal, certain taxable services would continue to be taxed at the current 6% service tax rate (i.e., group B (food and beverages), group I (telecommunication services and parking), and group J (logistics (a new taxable service, as described below). In addition, group H (credit card and charge cards) would continue to subject to a tax of RM25 per card per year. Payments received/ invoices issued before 1 March 2024 for taxable services to be provided post 1 March 2024 and until 31 August 2024 also would be taxed at the current 6% rate.
New taxable services under the proposal would include group C (“karaoke center”), group I (brokerage and underwriting services), and group J (logistics). The new logistics category—which would be subject to a registration threshold of RM500,000—is described as “a supply chain management process by planning, implementing and controlling the movement and storage of goods, services and related information efficiently and effectively from the original location to other location to meet the customer needs” and would include logistics management, warehousing or warehousing management, freight forwarding, customs agent, courier, transportation, delivery, shipping, and cold chain services, and delivery by e-platform providers. It would exclude, however, delivery of food and beverages, transshipment services, and delivery of goods outside Malaysia. A business-to-business (B2B) exemption would also apply.
Read a January 2024 report prepared by the KPMG member firm in Malaysia