Malaysia: Recent tax developments concerning indirect tax, transfer pricing, and e-invoicing

The KPMG member firm in Malaysia has prepared its September 2026 tax developments report, focusing on indirect tax, transfer pricing, and e-invoicing.

Indirect tax

• Service tax exemption for newborns: A new service tax exemption is available for newborns who have not yet obtained citizenship, provided one parent is a citizen and proper documentation is submitted.
• Service tax on employment services: It is clarified that service tax only applies to employment or management fees, not to pass-through expenses like workers' levies, work permits, or medical examinations.
• Sales tax exemption for certain manufacturing materials: Effective September 1, 2026, applications for sales tax exemption for raw materials for manufacturing animal feed, fertilizers, or pesticides must be submitted through the MySST portal.
• Various regulatory updates: Various regulations have been amended, including changes to the Customs, Tourism Tax, and Tourism Tax (Digital Platform Service Provider) rules, affecting government agencies, work week definitions in Johor, and simplifying electronic tax submissions for digital platforms.

Transfer pricing

• Effective date of amended rules: The Income Tax (Transfer Pricing) (Amendment) Rules 2026 are effective from the 2023 assessment year.
• Definition of multinational enterprise group: The definition is updated to mean a group of associated enterprises with business establishments in two or more jurisdictions.
• Offsetting adjustments: A new rule allows for an offsetting adjustment to be made on the assessment of the other party in a controlled transaction, subject to approval from the Director General.

E-invoicing

• Implementation threshold: The mandatory e-invoicing threshold has been raised from an annual turnover of RM 1 million to RM 3 million, effective September 1, 2026. Businesses below this new threshold are now exempt but may continue voluntarily.
• Implementation for statutory bodies: Statutory bodies, local authorities, and international organizations are required to implement e-invoicing starting July 1, 2025, for transactions related to the sale of goods and provision of services.
• Industry-specific FAQs: The document details updated e-invoicing guidelines for several industries:
  • Aviation: Temporary concessions are in place for including buyer's personal information on e-invoices for flight tickets.
  • Financial services (pawn-broking, etc.): Clarifications have been provided on when e-invoices are required, such as for ticket charges and interest, but not for the principal loan amount or for unclaimed surplus monies returned to the pawner.