Introduction
Service tax Malaysia was implemented on 1 September 2018 under the Service Tax Act 2018. It is a single-stage indirect tax imposed on specific services, known as taxable services, provided by registered persons in the course of business.
Service tax cannot be charged on any service not listed in the First Schedule of the Service Tax Regulations 2018, which is prescribed by the Minister of Finance. This means only designated services are subject to the tax, ensuring fairness and clarity for businesses and consumers.
Scope of Service Tax
Under Section 9 of the Service Tax Act 2018, Service Tax is charged on:
- Provision of taxable services provided in Malaysia by a registered person in the course of business;
- Imported taxable services acquired by any person in Malaysia; or
- Digital services provided by a foreign service provider to a Malaysian consumer.
However, Service Tax does not apply in designated areas (DA) and special areas (SA):
- Designated Areas (DA): Labuan, Langkawi, Tioman, Pangkor.
- Special Areas (SA): Free zones, licensed warehouses, licensed manufacturing warehouses, and Joint Development Areas (JDA).
In addition, exported services are exempted from Service Tax.
Definition of a Taxable Person
Under Section 12, Service Tax Act 2018, a taxable person refers to any person who provides taxable services as prescribed.
This includes:
- Individuals (including directors)
- Companies or enterprises
- Partnerships or clubs
- Trust bodies, co-operative societies, and associations
- Foreign service providers
| Type | Definition |
| Local | Registered person under Service Tax Act 2018 |
| Foreign | Foreign registered person providing taxable digital services |
What Are Taxable Services?
The First Schedule of the Service Tax Regulations 2018 lists taxable services. If a service is not listed, Service Tax does not apply.
1️⃣ Domestic Taxable Services
Service providers in Malaysia who meet the registration threshold must charge 6% Service Tax on taxable services.
2️⃣ Imported Taxable Services
Any person acquiring taxable services from overseas must self-declare and pay Service Tax using Form SST-02A by the last day of the following month after payment or invoice — whichever is earlier.
3️⃣ Digital Services (Foreign Service Providers)
Digital service means any service delivered or subscribed via the Internet or electronic network, which is automated and dependent on information technology (e.g. streaming, software, subscriptions).
- Service Tax is charged on the value billed by the foreign registered person to a Malaysian consumer.
- Tax is due when payment is received by the foreign registered person.
- If charged to a registered business, the business may claim a refund by offsetting the Digital Service Tax paid.
Categories of Taxable Services
The Service Tax covers the following groups of service providers:
| Group | Service Category | Threshold |
| A | Accommodation | RM500,000 |
| B | Food and Beverage | RM1,500,000 |
| C | Nightclubs, health/wellness centres, pubs, etc. | RM500,000 |
| D | Private Clubs | RM500,000 |
| E | Golf Clubs / Driving Ranges | RM500,000 |
| F | Betting and Gaming | RM500,000 |
| G | Professional Services | RM500,000 |
| H | Credit / Charge Cards | No threshold |
| I | Customs Agents | No threshold |
Registration Thresholds:
- Based on total taxable service value for the past 12 months (Historical Method); or
- Projected 12 months from commencement (Future Method) if newly established.
Service Tax in Designated and Special Areas
| Area Type | Example | Tax Treatment |
| Designated Area (DA) | Labuan, Langkawi, Tioman, Pangkor | Service Tax not applicable |
| Special Area (SA) | Free Zones, Licensed Warehouses, JDA | Service Tax not applicable |
These exemptions encourage investment and promote Malaysia’s free-trade and tourism sectors.
Key Takeaways
- Service Tax Malaysia applies only to specified taxable services.
- 6% rate applies to most services unless exempted.
- Digital and imported services are covered under Service Tax scope.
- Designated and special areas enjoy Service Tax exemptions.
- Registration threshold is based on 12-month taxable turnover
ANC Group – Your Personal Tax Advisor
Tax consulting is the core service of ANC Group. Our tax professionals provide clients with comprehensive tax support and guidance. We offer tax consulting and compliance services for expatriates, entrepreneurs, and listed and non-listed companies.
Our tax consulting services include business tax, transaction tax, personal tax, and corporate income tax. We don’t just guide you in interpreting and applying complicated taxation rules, but to explore new opportunities and business trends.
ANC Group keep you abreast with Malaysia tax updates and any changes in the local regulations.
We work closely with industry specialists, authorities, and associated professionals within ANC Group to provide the best-in-class integrated tax planning solutions. ANC specialists coordinate the accounting and taxation services to bring your business to success.
If you need professional tax advisory services regarding the Malaysia Income Tax Act 1967, our team is ready to assist you. Contact us here to discuss how we can support your business.
