SST IMPLEMENTATION BRIEFING

1. SST IMPLEMENTATION BRIEFING SERVICE TAX IMPLEMENTATION MohdSaifulIzwan bin Nasir Royal Malaysian Customs Department Negeri Sembilan

2. CONTENT OF BRIEFING • Registration • Returns / Payment • Contra System Facility • Special rules for specific areas • Accounting • Legislation • Scope and charge • Service tax mechanism • Taxable person • Rate • Taxable services

3. Service Tax Legislation Act • Service Tax Act 2018 Regulations • Service Tax Regulations 2018 • Service Tax (Customs Ruling) Regulations 2018 • Service Tax (Compounding of Offences) Regulations 2018 Order • Service Tax (Appointment of Date of Coming Into Operation) Order 2018 • Service Tax (Appointment Of Effective Date For Charging And Levying Of Service Tax) Order 2018 • Service Tax (Imposition Of Tax For Taxable Service In Respect Of Designated Areas And Special Areas) Order 2018 • Service Tax (Rate Of Tax) Order 2018

4. GST SST 3 Months Tax Holiday

5. HOW SERVICE TAX WORKS? Government collects tax ONCE (at the start) Tax rate 6% Businesses Consumer Service provider Government collects tax ONCE (at the start)

6. SCOPE AND CHARGE • Service tax is not chargeable on: • imported services Service tax is charged on: • taxable services; • provided in Malaysia • by a registered person carrying on his business

7. TAXABLE PERSON • Any person providing taxable services in Malaysia; and • The person is a registered person or liable to be registered.

8. BASIC ELEMENT OF SERVICE TAX NOT SUBJECT TO SERVICE TAX IMPORATION SCOPE OF TAX SUBJECT TO SERVICE TAX NO NO NO NO Made In Malaysia Purpose Of Business Taxable Person Taxable Services SUPPLY 6%

9. TAXABLE SERVICES (TRESHOLD) AND RATE OF TAX Threshold • Any person providing taxable services liable to be registered if the total amount of taxable services provided by him in 12 months exceed RM500,000 / RM1,500,000 Rate of tax • Fixed at a rate of 6%.

10. SCOPE OF (TAXABLE) SERVICES • Hotel • Insurance and Takaful • Food and beverage • Club • Gaming • Telecommunication /Pay-TV • Forwarding agents • Legal • Accounting • Surveying • Architectural • Valuer • Engineering • Consultancy • Employment agency • Security • Management services • Parking • Motor vehicle service or repair • Courier • Hire and drive car • Advertising • Domestic flight except Rural Air Services • Credit or charge card • IT services • Electricity

11. ACCOMODATION Threshold : RM 500,000.00 • Operator of accommodation including hotel, inns, lodging house, service apartment, homestay and any other similar establishment excluding accommodation premises provided by • The Federal Government, any statutory body or local authority or any private higher educational institutions registered under the Private Educational Institutions Act 1996 as facility for educational, training or welfare purposes; • An employer as a facility to his employees; • Any religious or welfare body registered with the Registrar of Societies Malaysia or under any written law, for religious or welfare activities and not for commercial purpose. • Service tax charged on actual value of taxable service provided

12. FOOD AND BEVERAGE OPERATOR Threshold : RM 1,500,000.00 Operator of restaurant, bar, snack-bar, canteen, coffee house or any place which provides food and drinks eat-in or take-away exclude canteen in an educational institution or operated by a religious institution or body Person providing catering services. Food court operator • Service tax charged on actual value of taxable service provided. Service charges are exclude from tax

13. NIGHT CLUB, DANCE HALLS, HEALTH & WELLNESS CENTRES, MASSAGE PARLOURS, PUBLIC HOUSES AND BEER HOUSES Threshold : RM 500,000.00 Operator of the night clubs, dance hall, health or wellness centres and massage parlours excluding : Any facilities providing similar activities registered under the Private Healthcare Facilities and Service Act 1998 Any government healthcare facilities Any facilities managed by any university established under Universities and University College Act 1971 or UniversitiTeknologi Mara Act 1976 for healthcare purpose Service tax charged on actual value of taxable service provided

14. Private Club & Golf Club and Golf Driving Range Threshold : RM 500,000.00 • Operator of private clubs • Operator of any golf course or golf driving range

15. Betting and Gaming Services • Casino • Game of chance • Sweepstakes • Gaming machines • Lottery • Betting • Service tax charged on collection, based on formula.

16. Professional Services Threshold : RM 500,000.00

17. Professional Services Taxable services that are provided within companies in the same group of companies and the services are under category G (a, b, c, d, e, f, g, h, or i) excluding employment agency and private agency as in Table 1, the taxable services are not subject to service tax.

18. Credit Card or Charge Card Services (No threshold specified ) Credit Card or Charge Card Provider Provision of credit card or charge card services. A specific rate of tax of RM25 is imposed upon issuance of principal or supplementary card and every subsequent year or part thereof.

19. Other Service Providers (Threshold : RM500,000 unless otherwise indicated) • Insurance and takaful • Telecommunication and paid television service provider • Customs Agent (No threshold) • Parking operator • Operator of motor vehicle service or repair centre or provides of motor vehicle or repair service • Courier service operator • Hire and drive motor vehicle and hire motor vehicle • Advertising • Transmission and distribution of electricity provider for domestic consumer excluding the first 600 kWh for minimum 28 days per billing cycle • Domestic flight except Rural Air Services

20. PROVISION OF ELECTRICITY Provision of electricity: • B2C; more than 600kWh • Service tax charged on actual value of taxable service provided

21. HOTEL, INSURANCE AND TAKAFUL Insurance and Takaful includes: • All insurance B2B. • All B2C general insurance or takaful excluding medical insurance or medical takaful is subject to service tax. • Service tax charged on actual premium paid.

22. SERVICE TAX REGISTRATIONLiability To Register Mandatory Any person providing taxable services is liable to be registered if – (a) in the case the total amount of taxable services is prescribed, the total amount of taxable services provided by him in 12 months exceed RM500,000 / RM1,500,000 and the liability to be registered is at the following time whichever is the earlier:: • Historical Method; The total value of taxable supplies in that month and the 11 months immediately preceding the month; • Future Method; The total value of taxable supplies in that month and the 11 months immediately succeeding the month (b) in the case no amount of taxable services is prescribed, the liability to be registered is on the date of the commencement of the business.

23. SERVICE TAX REGISTRATIONLiability To Register Voluntary Registration – (a) by application; (b) provide taxable services; - the total amount of taxable services provided by him in 12 months is RM500,000 / RM1,500,000 and below. (c) Subject to conditions determine by DG

24. SERVICE TAX REGISTRATIONOthers Registration • Branch Registration is allowed for Service Tax. • Group registration is not applicable.

25. SERVICE TAX REGISTRATIONTransitional Registration • Automatic Registration on 1st September 2018 • GST registered person; • Provide taxable services on the effective date; • He is a taxable person; • (if the total amount of taxable services is prescribed, the total amount of taxable service exceed RM500,000 / RM1,000,000) • Date of registration: 1 September 2018 • Service tax to be charged beginning 1st September 2018. • Voluntary Registration before effective date • Not GST registered person; • Provide taxable services on the effective date; • He is a taxable person; • (if the total amount of taxable services is prescribed, the total amount of taxable service exceed RM500,000 / RM1,000,000) • Date of registration: 1 September 2018 • Service tax to be charged beginning 1st September 2018.

26. DUE DATE • The service tax shall be due at the time when payment is received for the taxable service provided to the customer by the registered person. • If the whole or any part of the payment for any taxable service provided by the registered person is not received from the customer within a period of twelve months from the date of the invoice for the taxable service provided, service tax shall be due on the day following that period of twelve months.

27. RETURN • Any registered person have to declare SST return every two month according to the taxable period. • SST return has to be submitted not later than the last day of the following month after the taxable period ended. • SST Return has to be submitted regardless of whether there is any tax to be paid or not. • SST Return has to be submitted electronically or by post.

28. PAYMENTS • Service tax collected shall be paid not later than the last day of the following month after the taxable period ended. • Payment is to be made via • Electronically; or • cheque, bank draft and post it to SST Processing Centre. • Late Payment Penalty; • 10% - of the amount not paid after the last date of the first 30 days period. • 15% - of the amount not paid after the last date of the second 30 days period. • 15% - of the amount not paid after the last date of the third 30 days period.

29. SERVICE TAX FACILITY Contra System Taxable persons are allowed to deduct service tax in the return for cancelation and termination of services or any other reason such as reducing premiums or discounts. The deduction has to be made within one year after the payment was made, or such extended period as may be approved by the DG.

30. SPECIAL RULESTreatment in Designated Area (DA) * Special Area (SA) = Free Zone, Licensed Warehouse, Licensed Manufacturing Warehouse and Joint Development Area (JDA)

31. SPECIAL RULESTreatment in Special Area (SA)

32. ACCOUNTING Issuance of Invoices • By Registered person who provides any taxable services. • In hard copy or electronically • Containing prescribed particulars • In national language or English Credit Notes and Debit Notes • registered person is allowed to issue and receipt • shall make an adjustment in his return • shall contained the prescribed particular.

33. ACCOUNTING BASIS AND TAXABLE PERIOD Accounting Basis • Service Tax • Payment basis • Service Tax required to be accounted:- • At the time when the payments is received • On the day following period of twelve month when any whole or part of the payment is not received from the date of the invoice for the taxable service provided. Taxable Period • Bimonthly basis (every 2 months) • Specific basis

34. BAD DEBTS Bad Debts Claim • Can be claimed by a Registered person or a Ceased to be registered person. • Can be claim within 6 years from the date of service tax was paid • Subject to conditions & satisfaction of the DG Bad Debts Recovery • Has claimed and received the refund • Payment received from the debtor after bad debts claimed • Repay to DG in his return • Repay according to the formula

35. RECORDS KEEPING Records keeping: • 7 years • National language or English • To be kept in Malaysia, except permitted by DG to kept outside Malaysia • Can be kept in soft or hard copy

36. Miscellaneous Other general provisions provided in the Service Tax Act: • Refund of tax overpaid / erroneously paid • Pay tax short paid or erroneously refunded • Remission of tax, etc. by the Minister /DG • Penalties for offences