Sales Tax in Malaysia: Your Complete FAQ Guide (2024 Update)

Welcome to our comprehensive FAQ section on Sales Tax in Malaysia. Here, we delve into the specifics of the Sales and Service Tax (SST) system, offering clear and concise answers to your most pressing questions. From understanding the fundamentals of what sales tax is, to grasping the nuances of taxable goods and manufacturing definitions, this resource aims to clarify and inform. Whether you're a business owner, financial professional, or simply keen on Malaysian tax law, these frequently asked questions are tailored to guide you through the intricacies of Malaysia's SST.

Q: What is sales tax?

A: Sales tax in Malaysia is a tax imposed on the production and importation of specific goods. It's a single-phase tax collected from manufacturers at the point of sale.

Q: What goods are subject to sales tax?

A: Any goods which are not included in the Sales Tax (Goods Exempted From Sales Tax) Order 2018 are liable for sales tax upon manufacture or importation.

Q: What is the definition of manufacture?

A: Manufacturing is the process of transforming materials into new products, either manually or mechanically, including assembly but excluding installation at construction sites.

Q: Who is a taxable person?

A: A taxable person is someone whose manufacturing sales exceed RM 500,000 annually. They must register and comply with the MySST system.

Q: What is the rate of tax for sales tax?

A: Sales tax rates are either 5%, 10%, or a specific rate depending on the type of goods.

Q: How do I know that I am required to be registered under sales tax?

A: If your business manufactures taxable goods and exceeds the RM 500,000 threshold, registration for sales tax is necessary.

Q: How does the sales tax work?

A: The government levies sales tax at the manufacturing stage. This tax is embedded in the price consumers pay, passing through wholesalers and retailers.

Q: What are the responsibilities of a taxable person?

A: Registered entities must issue invoices with sales tax, maintain accurate records, and submit bi-monthly returns to the Royal Malaysian Customs Department.

Q: How do I register for sales tax?

A: You can register for sales tax through the MySST online system. You'll get a notification about your registration status, and if not, you may have to sign up on the MySST platform.

Q: How do I know that I will be registered?

A: Notifications about sales tax registration are sent via email, and previous GST registrants will receive a letter.

Q: Can I submit my sales tax return based on my company’s financial year-end?

A: You have the option to request a different submission period by writing to the Director General.

Q: Can I voluntarily register for sales tax?

A: Voluntary registration is available if you manufacture taxable goods.

Q: Can I register my branches separately?

A: No, separate branch registration for sales tax is not permitted.

Q: Is there any facility for group registration?

A: Group registration under sales tax is not available.

Q: What are the requirements of invoices issued?

A: Manufacturers must issue invoices in either Bahasa Malaysia or English with specific details either in print or electronically.

Q: Is reporting of credit and debit notes permissible in returns?

A: Adjustments for credit or debit notes are permissible within your sales tax return filings.

Q: On what basis do I account for sales tax?

A: Sales tax accounting should be done on an accrual basis.

Q: What is the procedure for submitting sales tax returns?

A: Sales tax returns are filed bi-monthly and must be submitted by the last day of the following month after the taxable period ends, either electronically or by post.

Q: How do I make a payment for sales tax?

A: Payments can be made online via FPX (Financial Process Exchange), or by cheque to the Customs Processing Center.

Q: Will there be a penalty for late payment?

A: Late payment penalties are tiered, starting at 10% and reaching a maximum of 40% after 90 days.

Q: How long should I keep the proper records under sales tax?

A: Keep records for seven years in either Bahasa Malaysia or English, inside or outside Malaysia, in hard or soft copy.

Q: Is there any relief for bad debts?

A: Claims for bad debts can be made within six years of the sale date, subject to specific conditions and formulas.

Q: How long would I be able to claim the GST input tax after the implementation of SST?

A: GST input tax can be claimed up to 120 days after SST commences.

Q: Do GST-registered persons need to account for GST for goods held in hand before the effective date of SST?

A: They should account for GST at 0% on such goods and declare this in their final GST-03 return.

Q: Does the provision of special schemes under GST apply to the SST regime?

A: Special schemes from the GST era do not carry over to the SST system.

Q: What is the SST treatment on goods delivered after 1 September 2018 during the tax holiday?

A: Goods delivered post-implementation of SST during a tax holiday period should have SST accounted for at the standard rate when invoicing.

Q: Would the Customs Department carry on with GST audits after SST comes into effect?

A: Yes, Customs will continue GST audits for closure purposes even after SST is implemented.