Monday, 19 October 2020

Tax Bulletin | UPDATES ON INDIRECT TAX: Sales Tax and Service Tax

We would like to inform that the Royal Malaysian Customs Department (RMCD) has uploaded the following in the website, MySST recently:-

Date of Publication

Subject

Salient Points

13 August 2020

Service Tax Policy

The RMCD has published the following service tax policies:-

1) Service Tax Policy No. 1/2020 (Amendment No. 1) [click HERE] – Expansion of scope of taxable service.

This is to highlight that the taxable service under item (m), Group G, First Schedule of the Service Tax Regulations 2018 (“STR”) namely provision of digital services including transaction for provision of digital services on behalf of any person is deleted and added into item (l) of the STR, as follows:

New item (l) – provision of digital services including provision of electronic medium that allows the suppliers to provide supplies to customers or transaction for provision of digital services on behalf of any person, excluding provision of such services in relation to matters outside Malaysia.

2) Service Tax Policy No. 3/2020 (Amendment No. 1) [click HERE] – Claiming a refund by offsetting method on service tax on imported digital service provided by foreign registered person.

This is to amend the technical term “Foreign Service Provider (FSP)” with “Foreign Registered Person (FRP)” that used on service acquired from a foreign vendor who is registered and charging service tax to its customers in Malaysia.

3) Service Tax Policy No. 4/2020 (Amendment No. 1) [click HERE] – Service Tax on online distance learning services.

Service Tax Policies No. 4/2020 & 5/2020 – These services provided by both foreign and local service providers are given the concession for the services to be excluded from service tax.

4) Service Tax Policy No. 5/2020 (Amendment No. 1) [click HERE] – Service Tax on online newspaper, online journals and periodicals.

5) Service Tax Policy No. 8/2020 (Amendment No. 1) [click HERE] – Group relief facility on provision of taxable services to company within the same group of companies.

This is amended to include digital service under item (l), Group G, First Schedule of the STR as a service that is eligible for intragroup relief.

Specific and Industry Guides

The RMCD has published the following guides:-

24 August 2020

1) GST Guide on Declaration and Adjustment after 1 September 2018 dated 18 August 2020 [click HERE].

This Guide is to replace the GST Guide on Declaration and Adjustment after 1st September 2018 dated on 8 May 2019.

17 September 2020

2) Guide on Service Tax Treatment on Disbursement and Reimbursement dated 15 September 2020 [click HERE].

To provide guidelines on how to apply service tax rules between “Disbursement” and “Reimbursement”.

17 September 2020

3) Guide on Service Tax Treatment on Consultancy, Coaching and Training Services dated 15 September 2020 [available in Malay language only click HERE].

To provide guidelines on scope of Consultancy, Coaching and Training Services that fall under taxable services.

5 October 2020

4) Guide on Service Tax Treatment on Management Services dated 1 October 2020 [available in Malay language only click HERE].

To provide the scope of management services that fall under taxable services:

1) Project management services, full or part of the project.

2) Tourism management services – removed as a taxable service from 1 September 2019.

3) Logistics management services – removed as a taxable service from 1 September 2019

4) Maintenance management services

5) Warehousing management services – Further explained in the Warehousing Guide below.

6) Collection and debt management services

7) Car park management services

8) Sports facilities management services

9) Secretarial management services

10) Any management services other than specified above, made on behalf or another person.

7 October 2020

5) Guide on Service Tax Treatment on Warehousing Management Services dated 6 October 2020 [available in Malay language only click HERE].

To provide guidelines on warehouse operator and the scope of warehousing management services. This includes services such as:

1) Handling

2) Loading and unloading

3) Sorting

4) Consolidation and de-consolidation

5) Labelling

6) Inventory control

7) Storage space

8) Pick and pack

9) Security control

Note: Transportation of goods is excluded from the scope of warehousing management services.

7 October 2020

6) Guide on Service Tax Treatment on Professional Services dated 6 October 2020 [click HERE].

To provide guides on digital services that fall under Professional Services Group G, First Schedule of the STR.

7 October 2020

General Guide

General Guide on Service Tax dated 6 October 2020 [available in Malay language only click HERE].

This Guide is to replace the General Guide on Service Tax dated on 7 September 2018.

7 October 2020

Sales Tax

Sales Tax (Person Exempted from Payment of Tax) (Amendment) (No. 2) Order 2020 [click HERE]​​​​​​​

 

We will keep you updated on any further guidelines and announcements to be issued by the Royal Malaysian Customs Department or other relevant authorities, if any.

Tuesday, 11 August 2020

New Public Rulings No.1/2020, No.2/2020, No.3/2020 and No.4/2020

We would like to inform that the following Public Rulings (PRs) have been uploaded in the website of the LHDNM recently: - 

Public Rulings

Title

Date of

Publication

Objective & Salient Points

No. 1/2020

[click HERE]

Tax Incentives For Bionexus Status Companies

22.05.2020

To explain the tax treatment in respect of tax incentives for a BioNexus Status Company (BNX) in Malaysia. 

 

It is stated in this PR that a BioNexus Status is a special status awarded to qualified biotechnology companies undertaking value-added biotechnology or life sciences activities. A company which has been awarded the BioNexus Status would be able to enjoy fiscal incentives, funding assistance and other benefits to assist the growth of the company.

 

The PR also explains the application process for BioNexus status, the tax incentives available for a BNX and treatment of losses incurred by a BNX.

 

Note: This PR replaces PR No. 8/2018.

No. 2/2020

[click HERE]

 

 

 

 

 

 

 

 

No. 3/2020

[click HERE]

 

Note : Both PRs are

to be read together

Tax Treatment Of Stock In Trade Part I - Valuation Of Stock

 

 

 

 

 

 

 

 

Tax Treatment Of Stock In Trade Part II - Withdrawal Of Stock

03.06.2020

 

 

 

 

 

 

 

 

 

03.06.2020

To explain the valuation of stock in trade in relation to a business carried on by a person in Malaysia. 

 

The PR states that for tax purposes, the value of the stock in trade is important in determining the adjusted income of a business.

 

The PR explains the basis of valuation of stock in trade for tax purposes is that the market value of an inventory (stock in trade) would be equal to the fair value or estimated selling price. Net realizable value is not acceptable for tax purposes.

 

To explain the tax treatment of withdrawal of stock in trade in ascertaining the adjusted income in relation to a business for the basis period for a year of assessment carried on by a person in Malaysia. 

 

The PR states that the stock in trade withdrawn from a business for own use or for use in a different business activity or reclassification from trading to capital or vice versa due to a change of intention of the business, has to be accounted for and valued to an amount equal to the market value of that stock in trade.

 

It is also stated that the market value of stock in trade can be reduced under certain circumstances. Reference can be made to the example provided in this PR.

 

In the event the stock in trade is parted with by compulsion, the PR states that the gains or profits from a business shall include an amount receivable arising from stock in trade parted with by element of compulsion (including requisition or compulsory acquisition). The amount receivable will be treated as gross income of the business in the year where the stock in trade was compulsorily acquired.

 

Note: The above PRs replace PR 4/2006.

No. 4/2020

[click HERE]

Tax Treatment Of Any Sum Received And A Debt Owing That Arises In Respect Of Services To Be Rendered

16.06.2020

To explain where in the relevant period –

 

(a) any sum received by a person, notwithstanding that no debt is owing to the

person; and

(b) a debt is owing to a person

 

that arises in respect of services to be rendered is to be treated as gross income of the person from a business for the relevant period. 

 

The PR explains that the amendment to paragraph 24(1)(b) of the ITA provides that where in a relevant period, a debt owing to the relevant person arises in respect of services to be rendered in the relevant period or in any following basis period, the amount of the debt is to be treated as gross income of the relevant person from the business for the relevant period.

 

Pursuant to the subsection 24(1A) of the ITA, where in the relevant period, any sum is received by a relevant person in the course of carrying on a business, in respect of any services to be rendered in the relevant period or in any following basis period, the sum is to be treated as gross income of the relevant person from the business for the relevant period the sum is received, notwithstanding that  “no debt is owing to the relevant person in respect of such services”. In other words, payment received in advance will be brought to tax in the basis period the sum is received.

 

The PR states that the application of paragraph 24(1)(b) would have to be considered first before applying subsection 24(1A).

 

The PR also provides examples of services that are not subject to the above paragraph 24(1)(b) and subsection 24(1A) of the ITA.

Updates On Indirect Tax: Goods and Services Tax & Service Tax

We would like to inform that the Royal Malaysian Customs Department (RMCD) has uploaded the following in the website, MySST recently:-

Subject

Date of Publication

Objective & Salient Points

FAQ Pertaining to GST Refund

[available in Malay language only click HERE]

16 June 2020

The RMCD has on 16 June 2020 published the FAQ Pertaining to GST refund [“the GST FAQ”]. The salient points extracted from the GST FAQ are as follows:-

  • Where there is a change to the registration details of GST of a GST registrant such as address of office premises, phone number, bank information and etc., the GST registrant is required to update the relevant information in Taxpayer Access Point [“TAP”].
  • All applications for GST refund will be subject to verification (i.e. desk review), audit or investigation. Any refund of the GST overpaid will be made within 6 years from 1 September 2018.
  • A registered person may use bank guarantee [“BG”] as an alternative to request RMCD to expedite the processing of the balance of the GST refundable prior to completion of GST audit.
  • The application for BG and letter of undertaking can be made via email: bgrefund@customs.gov.my.

 

Notification of GST Refund

[available in Malay language only click HERE]

16 June 2020

The RMCD has on 16 June 2020 published the Notification of GST Refund [“the Notification”]. For the purpose of expediting the GST refund during/post MCO period, the RMCD will be adopting “pay first, audit later” approach for selected companies as summarised below:-

  1. For any claim of GST refund less than RM100,000
  • The GST refund will be made upon completion of verification process (i.e. desk review). However, the company or claimant will still be subject to GST audit at any time within 6 years from 1 st September 2018.
  1. For any claim of GST refund amounted to RM100,000 and above
  • The GST refund will be made if the company or claimant passes the risk assessment review and verification process (i.e. desk review). However, the company or claimant will still be subject to GST audit at any time within 6 years from 1st September 2018.
  • In the event that the company or claimant fails the risk assessment review, the GST refund will not be made until field audit is completed. However, for the purpose of easing the company’s cash flow, the GST refund may be made in full if the following conditions are satisfied:-
  • The verification process (i.e. desk review) is passed;
  • A letter of undertaking declaring that all the information furnished are correct and that any tax (both GST and penalty) underpaid will be made good to RMCD; and
  • A BG at the rate of 10% based on the total GST refundable as at 1st January 2019 is furnished.
  • Upon completion of the field audit, the BG will be returned to the taxpayer after verifying that the company does not have any tax underpaid.

 

Companies that have yet to receive the GST refund can access the TAP or contact the nearest RMCD office to check on the status of the GST refundable and any information requested by the RMCD.

 

Service Tax Policy No. 9/2020 (Amendment No. 1)

[click HERE]

17 June 2020

The RMCD has on 17 June 2020 published the Service Tax Policy No. 9/2020 (Amendment No. 1). The amendment is made subsequent to the Short-Term Economic Recovery Plan [“PENJANA”] announced by our Prime Minister on 5 June 2020. The amendments are in relation to the following exemptions:-

·        the service tax exemption for hotel related services will be extended from 31 August 2020 to 30 June 2021; and

·        the tourism tax will also be exempted from 1 July 2020 to 30 June 2021.

 

FAQ Pertaining to PENJANA

[available in Malay language only click HERE]

 

30 June 2020

The RMCD has on 30 June 2020 published the FAQ Pertaining to PENJANA [“the PENJANA FAQ”]. Please refer to the PENJANA FAQ more information.

 

Specific and Industry Guides

 

The RMCD has published the following guides:-

1 July 2020

  • Guide on Transmission and Distribution of Electricity Services dated 1 July 2020 [click HERE];

13 July 2020

  • Guide on Information Technology Services dated 13 July 2020 [click HERE];

13 July 2020

  • Guide on Refund on the Acquisition of Services by Foreign Missions and International Organisations dated 13 July 2020 [click HERE]; and

29 July 2020

  • Guide on Digital Services by Foreign Service Provider (FSP) dated 1 August 2020 [click HERE].

We will keep you updated on any further guidelines and announcements to be issued by the Royal Malaysian Customs Department or other relevant authorities, if any.

Friday, 12 June 2020

New Publication | Corporate Liability – It’s Time to Act Now!

Section 17A of the MACC Act 2009 has been enforced on 1 June 2020 as planned by the Malaysian government.

If you’re not sure what the newly enforced section is all about, read our latest publication to find out further, including the amendments that Bursa Malaysia and Securities Commission have made in support of the government’s stance on corporate liability issues.


CTRL+Click on the following image to download a copy of our latest publication: