The Ministry of Finance has announced that 6% of Service Tax will come into effect in Malaysia on 1st September 2018, repealing the Goods and Services Tax (GST) which was first introduced as 6% on 1st April 2015 and further reduced to 0% on 1st June 2018.
Unlike GST which taxes all goods and services unless an exemption is provided, Service Tax is only charged on certain prescribed services made by prescribed taxable persons.
For Life Insurance products, Service Tax of 6% will be chargeable on the premiums of products below:
B2B (Business to Business) – Policies sold to an institution (where policyowner is an organization) or policies assigned to an institution (where assignee is an organization)
B2C (Business to Consumer) – Policies sold to an individual or policies assigned to an individual
For Employee Benefits products, Service Tax of 6% will be chargeable on the premiums of products below:
For General Insurance, the 6% Service Tax shall be charged on *all types of insurance contracts to cover any risks incurred in Malaysia to an individual or business organization *EXCEPT the areas listed in below.
How about those car insurance bought or renewed between June to August 2018?
Under the regulations, car insurance is subjected to a 6% tax. In this case, insurance companies can chase back the tax (although already renewed) for the period starting 1st Sept onwards on a pro-rate basis.
Not a popular one...
Provision of credit card or charge card services. A specific rate of tax of RM25 is imposed upon the issuance of principal or supplementary card and every subsequent year or part thereof.
How about investment via a unit trust (UT) scheme / private retirement scheme (PRS)?
Based on the Regulations, the services provided by asset and fund managers are excluded from the ambit of service tax. So, sales charge will not be subjected to service tax effective from 1st September 2018, which is good for the asset management industry.
Based on the Regulations, the services provided by asset and fund managers are excluded from the ambit of service tax. So, sales charge will not be subjected to service tax effective from 1st September 2018, which is good for the asset management industry.
How about share trading services?
Another beneficiary of SST implementation would be the capital market as well. Compared to GST, all share trading services will not be subjected to SST (although stamp duty still applies). Hopefully, more retail participation could be seen after 1st September 2018.
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