Sales tax was reinstated on 1 September 2018 as Malaysia moved away from the former GST regime.
Sales tax is charged by registered manufacturers of taxable goods and on the importation of taxable goods into Malaysia.
As a general rule, goods are subject to sales tax at a rate of 10%, however some goods are taxed at the reduced rate of 5%, specific rates and others are specifically exempt. Exempt goods and goods taxable at 5% are defined by the HS tariff code of the goods as prescribed in a gazette order.
Sales tax is a single stage tax with no credit mechanism. To maintain the single stage nature of the tax, several exemption mechanisms exist. Generally, the exemptions must be applied for and all come with conditions which must be adhered to. The main types of sales tax exemptions available are:
Schedule A Exemption
These are exemptions for specific persons or industries. Examples include goods imported temporarily, ships spares, small value relief for personal items and duty free items. It can also include goods imported or locally manufactured for use in the petroleum upstream industry and trade facilitation measures, such as the purchase of goods for export. Some industries specifically approved by the Malaysian Investment Development Authority (MIDA) may also obtain exemption on fixed assets for use in approved activities.
Schedule B Exemption
These exemptions are given to manufacturers of specific goods such as price controlled goods, pharmaceutical products milk products and exempt goods for export. Manufacturers of such goods would not need to be registered for sales tax to avail of the exemption.
Schedule C Exemption
Schedule C exemptions are generally for registered manufacturers or their agent to acquire goods free from sales tax on the basis that such goods will be used as inputs for the manufacture of taxable goods.
Any person manufacturing taxable goods with a value in excess of RM500,000 in a 12 month period is required to register for sales tax. Toll manufactures carrying out value adding activities in excess of RM500,000 in a 12 month period are also required to register.
Sales tax returns must be filed and the tax paid every two months.
Sales tax registrants importing taxable services must account for and pay service tax in a separate declaration on a monthly basis.
Below are the main services we provide in respect of sales tax. We also offer bespoke services, so if these do not meet your needs, please contact us for further discussion.