“Malaysia should introduce [a] GST as soon as possible.” (Structural Policy Country Notes, Malaysia, OECD, 2013).
Prior to April 1, 2015, there was no value added tax or goods and services tax (GST) in Malaysia. Instead, Malaysia levied a Sales Tax and a Service Tax. The Sales Tax was a federal consumption tax imposed on a wide variety of goods, and governed by the Sales Tax Act 1972. The Service Tax, also a federal consumption tax, was levied on customers who consumed certain taxable services, and was governed by the Service Tax Act 1975. Both were single stage taxes. They were abolished on April 1, 2015, upon the introduction of the Malaysian GST.
The GST is administered by The Royal Malaysian Customs Department, with the addition of public rulings on the application of the GST by the Director General of Customs and Excise, and is governed by the Goods and Services Tax Act 2014 (“GST Act”) and the Malaysian Goods and Services Tax Regulations 2014.
The Malaysian GST is a federal consumption tax based on the valued-added concept with a broad base, payable by intermediaries on all stages of the supply chain, with the tax burden ultimately borne by the consumer. As with GSTs in other jurisdictions, businesses may recover input tax credits incurred in connection with standard-rated supplies and zero-rated supplies, but cannot recover input tax credits for exempt supplies. In general, the Malaysian GST is levied on any supply of taxable goods or services made in Malaysia by a taxable person in the course of furtherance of business, (see Section 9(2) of the Malaysian GST Act).
The new GST differs significantly from the previous regime. In addition to the fundamental conversion to a multi-stage consumption tax, the procedural differences are vast. From administrative matters concerning registration and invoicing requirements, to penalty and interest rates, the overhaul will undoubtedly impose a substantial shakeup to commercial operations in Malaysia. The GST is a step forward towards a more modern consumption tax -- one whose principles should be familiar to foreign investors. (Currently over 130 countries have introduced a VAT-like consumption tax, including all OECD member states except the US).
Table 1, below, provides a comparison of key aspects of the new Malaysian GST regime and the prior Sales and Service Tax regime. For more information and a detailed analysis of Malaysian indirect tax, see The VAT Navigator in the Bloomberg BNA Premier International Library, available by subscription.
even more in-depth analysis and expertise with a
free trial to the Premier
International Tax Library
Table 1: A Comparison of Key Aspects of Malaysia’s Current and Prior Indirect Tax Regimes
by Max Schofield, Tax Editor
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)