On 7 February 2024, the Royal Malaysian Customs Department issued a draft guide regarding the upcoming increase in the service tax rate and its expanded scope. The proposals are set to take effect on 1 March 2024. The Ministry of Finance is currently reviewing this guide before it is published in the Official Gazette.
The key points of the draft guide include:
- An increase in the service tax rate from 6% to 8% for all current taxable services, with a few exceptions that will continue to be taxed at the 6% rate. These exceptions include food and beverage, telecommunications, and parking services. This will go into effect on 1 March 2024.
- The annual service tax rate for credit and charge cards remains unchanged at MYR 25 per year.
- Starting from 1 March 2024, the range of services subject to service tax has expanded. The newly included services are as follows:
- Karaoke services at a rate of 8%
- Maintenance and/or repair services at a rate of 8%
- Brokerage and underwriting services for non-financial services at a rate of 8%.
- Logistics services at a rate of 6%
The service tax rate to be applied depends on the date when the service is provided or paid for, as per the following transition rules:
- If taxable services are provided in full before 1 March 2024, the existing tax rate will be charged;
- If taxable services are provided in full on or after 1 March 2024, the new tax rate will be charged;
- If taxable services are provided before or after 1 March 2024, the taxable amount will be apportioned and charged based on the corresponding tax rate.
- If any payment is received before 1 March 2024 in connection with services provided on or after 1 March 2024, such payment will be subject to the old tax rate.
