Last year on the 1st of September, Malaysia replaced its Goods and Services Tax (GST) with Sales and Services Tax (SST). Both of these are indirect tax regimes charged on certain taxable goods and services. Under the new Sales and Services tax, sales tax is levied on specifically identified classes of goods and service tax is levied on certain services. There are many advantages that all kinds of businesses are going to enjoy with this new tax regime which makes company formation in Malaysia a good opportunity especially if the below-mentioned advantages are what your proposed business will enjoy in Malaysia. But hold your horses and read about the disadvantages as well that might crop up for your business.
Advantages of Sales and Services Tax
Few of the many advantages of sales and services tax Malaysia are-
- SST is a single stage tax meaning that it is imposed only once during the entire supply chain either at the time of manufactured or at the time imported in Malaysia. This means the cost of living will probably go down for everyone, consumption will increase and businesses will be able to present their products and services at competitive prices.
- The number of exempted goods is quite a lot under this new indirect tax regimewhich also include food items, chemicals, pharmaceutical goods, medicine, iron, steel, and machinery. This means a fewer number of businesses have to comply and be registered under SST.
- Malaysia`s special designated areas are exempt from services tax.
- Tailoring, jewelry making, services of opticians and engravings are exempt from SST which is extremely good news for all small and medium-sized enterprises involved in such activities.
- Imported services and exported services are non-taxable services under sales and services tax of Malaysia.
- Sales and services tax is adjusted so as to minimize its impact on lower income groups.
- With this new tax regime, the compliance costs have come down for all.
- The cost of doing business has also gone down. So, all the business minds out there looking for company formation in Malaysia be rest assured that there is one less thing for you to worry about.
Disadvantages of Sales and Services Tax
SST`s criticism and disadvantages are as follows-
- While most countries are moving to GST, Malaysia reverted back to SST even though many believe it to be a less progressive form of tax.
- This new tax regime has caused some businesses uncertainty as well as money.
- SST causes cascading and compounding effect.
- It has certain classification issues as the total number of classes of goods currently stand at 45. So, make sure to get someone to help you when you are trying to figure out under which class your products fall.
- This tax regime does not give the right to claim any input tax creditno matter what kind of business you are operating.
Other Key Points of SST
Just getting familiar with the advantages and disadvantages of sales and services tax shouldn`t make you start weighing your options about starting a business in Malaysia. Here are some more aspects of SST that you should be aware of-
- It is levied on taxable goods manufactured in Malaysia by a taxable person or taxable goods imported into Malaysia.
- If you are manufacturing taxable goods and your annual turnover exceeds RM 500,000 then you must register yourself under SST immediately or face penalties and imprisonment.
- Even if your annual turnover doesn`t exceed RM 500,000, you can still voluntarily register for SST if you think that in the foreseeable future the annual turnover of your business activities might just exceed the stipulated threshold and you wish to avoid last minute registration.
- Every registered taxable person should issue a tax invoice, charge sales tax on sales and submit bi-monthly returns.
- The language of the tax invoice can either be Bahasa Malaysia or English.
- Sales tax can be paid either through e-payment or through cheque/draft/post to SST processing center.
- Sales and services tax is refundable in case your business incurs some bad debts. However, you must write off such invoices/amount receivables as bad debts in your bi-monthly tax payments.
- A service tax of RM 25 is annually charged from every credit card holder.
- Branch registration/group registration in case of multiple entities can be obtained.
With this sudden shift in the tax system of Malaysia, many of you who own a business in Malaysia might find yourself at a disadvantage with this relatively shorter period to get to know all about the new tax regime and to adjust to it in a timely fashion. So, it`s best if you work with people or better experts who are up to speed with the changes and can help your business with the implementation process. Business Setup Worldwide has experts in Malaysia who can help your business with accounting and bookkeeping process which is in compliance with SST. Our experts can also help you with company registration, company secretarial services and intellectual property services if that is what you seek in Malaysia for the smooth and hassle-free running of your business. If you do need any such help you may contact us whenever you feel like.