The laws governing the administration and operation of service tax are:-
i. Service Tax Act, 1975
ii. Service Tax Regulations, 1975
iii. Service Tax (Rate of Duty) Order, 2000
i. A taxable service provided in Langkawi, Labuan, Free Zones, Tioman Island and JDA is not subjected to service tax.
ii. A taxable service that is provided to those overseas is not subjected to tax.
iii. A taxable service that is provided by those overseas directly to those
There are three categories of licensing under the Service Tax Act 1975:-
i. Compulsory Licensing - any taxable person who provides a taxable service must apply for a service tax licence when total sales of the service within a period of twelve months or part thereof has reached its threshold.
ii. Voluntary Licensing - any person who provides taxable service for a period of twelve months or part thereof and the total sale has not reached the threshold, can voluntarily apply for a service tax licence.
iii. Directive licensing due to artificial separation of business.
Service Tax Licence Application
1. Application must be made by:
- The Director or secretary for a corporate body.
- The owner or secretary for a non corporate body.
- Any person responsible in receiving any notice or other documents.
- All the shareholders of the shareholders company.
2. JKED No. 1 (RM0.15 cents each) must be filled and submitted in two (2) copies to the Senior Officer of Customs at the one-stop Licensing Centre, Royal Customs Department which is nearest to the company’s business management office. The following documents are to be attached :
- Official letter pertaining to the application.
- Authorised letter / appointment letter for a person responsible to deal with customs.
- Form 9 – Registration of business
- Memorandum & Article of Association (MAA)
- Form 24 – Return of Allotments of Share
- Form 44 – Registration of companies
- Form 49 – Particulars of Directors and Secretaries.
- Photostatted copy of Identity Card/Passport.
- Photos (2 copies) of the Applicant / partners.
- Location plan of the premise
Additional Supporting Documents:
- Certificate of Fitness (CF)
- Certificate issued by professional bodies.
- Approval letter from customs for forwarding agent.
- Bank Guarantee
- Approval letter from Bank Negara for charge cards/credits cards
- Approval letter from District Office Licensing Board - Section 35 Excise Act 1976.
- Photocopy license from local authority such as Health Centre Licence
- Authorised letter from the company if the application made by an agent.
- Appendix C – information about annual sales turnover (Profit & Loss Account).
Some of the professional bodies do not have to register with the Company’s Act 1965 or Register of Business 1956 if they want to start any businesses. The businesses can be started if they have a certificate issued by the Registered Professional Bodies.
3. JKED No. 1 must be signed by the owner/director/secretary/any person responsible in receiving any notice or other documents on behalf of that business body/all the partners of the business.
4. Applicant designation must be shown clearly whether he is a Director, Chairman or others with authority.
5. When all the particulars needed in the JKED No. 1 form has been completed, a service tax licence will be issued to the applicant.
Charge To Tax
Service tax is charged and levied on:-
a. Taxable Service – any service which is prescribed to be a taxable service, and means any service referred to in Second Schedule of the Service Tax Regulations 1975 in respect of which service tax is chargeable under the Service Tax Act, 1975.
b. Taxable Person – any person who is prescribed to be a taxable person and means any person referred to in Second Schedule of the Service Tax Regulations, 1975, in respect of which service tax is chargeable under the Service Tax Act, and includes an individual, a firm, an association of persons, a company and every juridical person.
Rate Of Tax
Service tax has to be charged and levied on the taxable service provided by the taxable person. Rate of Service Tax is 5%.
When Services Tax Is Due And Payable
The service tax chargeable under the Service Tax Act 1975 shall be due at the time:
i. When payment is received for the taxable service provided to the customer by the taxable person.
ii. When the whole or any part of the payment for any taxable service provided is not received within a period of twelve calendar months from the date of issued of the invoice for the taxable service provided, service tax shall be due on the day following that period of twelve months.
iii. Any tax which falls due during any taxable period shall be payable to the Director General within twenty-eight (28) days from the expiration of that taxable period.
* Taxable Period
A period of two calendar months during which the taxable person provided taxable service, is known as the taxable period. At the end of each taxable period and not later than 28 days there from, the taxable person shall submit a return (in form C.P. No. 3) and pays the tax to the Customs Department. Nil return has to be submitted if there is no payment for a particular taxable period.
A penalty is imposed for the payment not made within the stipulated period of 28 days from the expiration of the taxable period.
Determination Of Charge And Value
According to section 4 of the Service Tax Act 1975 the charge, premium or value on which service tax is payable (charged and levied) shall be ascertained, in this manner :
DETERMINATION OF CHARGE AND VALUE
a) Taxable service for the sale of goods by a taxable person to :
i. person independent of the taxable person
the actual price for which the goods are sold.
ii. a person not independent of the taxable person
the price at which the goods would have been sold in the ordinary course of business, to a person independent of the taxable person.
b) Taxable service for the provision of goods where no charge is levied/made for provision of the goods
the price the goods would have been sold in the ordinary course of business to a person independent of the taxable person.
c) Taxable service other than the above
i. provided by a taxable person to a person independent of the taxable person
the charge levied or collected;
ii. provided by a taxable person to a person not independent of the taxable person
the charge or premium levied or collected for the taxable service which would have been provided in the ordinary course of business to a person independent of the taxable person;
iii. provided by a taxable person where no charge or premium is levied or collected
the charge or premium which would have been levied or collected in the ordinary course of business for providing taxable service to a person independent of the taxable person.
Exported Taxable Services
Exported taxable service means service supplied for and to a person in a country other than Malaysia (excluding Langkawi, Labuan dan Free Zones), provided that the service is not supplied in connection with goods or land situated in Malaysia and the person is not in Malaysia at the time the service is performed.
Who Pays The Services Tax
The taxable person who provides taxable service pays the service tax to the Customs Department. This person will issue an invoice to the customer of such taxable service, he will state on the invoice, separately, the amount of service tax payable. The person, therefore, recovers the tax payable from the customer.
For further information on service tax, please contact:
Internal Tax Division,
Royal Customs Malaysia Head Office,
Level 4 South, No.3 Persiaran Perdana,
Ministry of Finance Complex, Precinct 2,
Federal Government Administrative Center,
Tel : 03-8882 2624 / 2625
Fax : 03-8889 5869