Tax rate by region Malaysia

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

Malaysia

Malaysia implemented a Goods and Services Tax (GST) in 2015 to modernize its tax administration.

Official government link: Lembaga Hasil Dalam Negeri

8.00%

E-products and services VAT/Sales tax rate

Reduced tax rate product categories

No specific digital goods or services have reduced tax rate

Exempted product categories

No specific digital goods or services are exempt

Reverse charge mechanism for B2B sales

No

Tax ID validation required

Yes

When do you have to register

Registration must be done once threshold has been exceeded

Online registration possible

Yes

Local representative needed

Not mandatory, but recommended

Registration procedure

Non-resident businesses providing digital services must register for SToDS online by submitting a DST-01 form through the MYSToDS portal.

List of digital and electronic services liable for tax

Software, applications, and video games: Includes downloading online software and online gaming.
Music, e-books, and films: Covers the supply of music, streaming services, and subscription-based media.
Advertisement and online platforms: Involves offering online advertising space on digital platforms and providing platforms for trading products or services.
Search engines and social networks: Encompasses customized search-engine services.
Internet-based telecommunication: Services provided over the internet.
Database and hosting: Includes website hosting, online data warehousing, file-sharing, and cloud storage services.
Online training: Covers distance learning, e-learning, online courses, and pre-recorded webinars.
Others: Includes subscriptions to online newspapers and journals, and the provision of other digital content like images, text, information, and payment processing services.

Penalties

Late returns: You’ll face penalties for late submissions.
Missed payments: Underpaying your SST will result in additional taxes, interest, and penalties.
No registration? Big mistake! Failing to register for SST when required can lead to significant penalties.
Tax evasion is a crime! Deliberately avoiding SST payments is a serious offense and can land you in jail.

Registration threshold

RM 500.000 

Filing interval

Quarterly

Filing deadline

By the last day of the month following the reporting period.

E-invoicing requirements

Yes

Record keeping

The following records must be kept for at least 7 years:

Books of accounts
Invoices
Vouchers
Receipts
Bank statements
Payroll records
Other supporting documents

How-To Guides: Malaysia SaaS VAT

Step: 1 Threshold

Effective January 1, 2020, Malaysia requires non-resident vendors (including online platforms) of digital services to customers (B2C and B2B) in Malaysia to register for and collect service tax if their sales exceed MYR 500,000 in a 12-month period. Businesses that have been charged service tax on digital services provided by a foreign registered person (FRP) are exempted from accruing service tax in Malaysia on these imported taxable services.

 

On August 30, 2019, the Royal Malaysian Customs Department (RMCD) published the Service Tax (Digital Services) Regulations 2019, which set out the rules pertaining to the registration, compliance, and penalties for the new service tax obligations on digital services.

Step: 2 Business Registration

Foreign Service Providers (FSP) do not need a local entity but must register as a Foreign Registered Person (FRP) via the MySToDS portal.

Step: 3 TIN/VAT Number

A specific SToDS Registration Number is issued by the Royal Malaysian Customs Department (RMCD).

Step: 1 Determine if you need to register.

The standard VAT rate in Malaysia is 8% (Standard rate for digital services effective March 1, 2024).

Step: 2 Determine if you need to register.

To calculate your tax amount, use the following formula: 

 

Tax Amount = Net Price x 8%

Step: 3 Reverse Charge (B2B)

Reverse charge generally does not apply where the supplier is registered under the digital services regime. Unlike the general “Imported Taxable Services” rule, foreign digital service providers must charge 8% service tax to both Malaysian businesses (B2B) and individuals (B2C).

Step: 1 Selling B2C

Identify consumers using 2 of 3 criteria:

  1. Payment via Malaysian bank/provider
  2. Malaysian IP/Mobile code
  3. Residential address in Malaysia.

Charge 8% tax.

Step: 2 Selling B2B

Charge 8% tax.

 

Note: Registered B2B customers may be eligible for a “B2B Exemption” (preventing tax cascading) only if they provide the exact same service to their own clients. Otherwise, the FRP must collect the tax.

Step: 3 Invoice Requirements

Invoices must include:

  • Date
  • FRP Registration Number
  • Description of digital services
  • Total amount payable (excluding tax)
  • Total Service Tax due
  • Total amount payable (including tax).

Step: 1 Filing Interval

Taxes should be filed quarterly (every 3 months).

Step: 2 Filing Deadline

Taxes should be filed on the last day of the month following the end of the taxable period (e.g., for Q1 ending March 31, the deadline is April 30).

Step: 3 Submission

Taxes should be filed via the MySToDS Portal (Form DST-02). Payments are made in MYR via Telegraphic Transfer (TT) or FPX.

Step: 4 Record Keeping

All tax records should be maintained for 7 years in English or Malay.

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating Malaysia VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

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