Registration and Threshold of Service Tax in Malaysia
Registration for service tax is a fundamental compliance requirement under the Service Tax Act 2018 (referred to as “the Act”). Any business that provides taxable services and meets the prescribed conditions must register with the Royal Malaysian Customs Department (“RMCD”). Registration is not merely a statutory requirement, it establishes the business’s responsibility to charge, collect and remit service tax correctly.
The registration framework is designed to ensure that businesses with substantial taxable activities are brought within the tax net, while smaller-scale providers may be excluded unless specifically prescribed. Understanding the point at which registration becomes mandatory, the applicable thresholds and the consequences of failing to register is therefore essential for all service providers operating in Malaysia.
-
Liability to Register
Under Section 12 of the Act, any person who provides taxable services as prescribed by the Minister is a “taxable person” and is required to register for service tax. A person becomes liable to register at the earlier of the following:
|
Method
|
Threshold Period
|
Deadline to Notify Director General
|
|
Historical method
|
At the end of any month, where
the total digital services in that month and the eleven months immediately preceding that month has exceeded the registration threshold (e.g. RM500,000 /
RM1,000,000 / RM1,500,000)
|
Within 1 month following the
month where threshold exceeded the registration threshold (e.g. RM500,000 /
RM1,000,000 / RM1,500,000)
|
|
Future method
|
At the end of any month, where
the total digital services in that month and the eleven months immediately succeeding that month has exceeded the registration threshold (e.g. RM500,000 /
RM1,000,000 / RM1,500,000)
|
Within 1 month following the
month where threshold exceeded the registration threshold (e.g. RM500,000 /
RM1,000,000 / RM1,500,000)
|
In addition, the Minister may prescribe that certain categories of service providers must register from the commencement of their business, regardless of the value of taxable services provided (e.g. provision of credit card service or provision of education service).
-
Registration Threshold
The Act prescribed different registration thresholds for various categories of taxable services. In general, a service provider is only required to register when the total value of taxable services exceeds the relevant threshold within a 12-month period.
|
Threshold
|
Applicable Categories
|
|
RM500,000
|
Standard threshold applicable
to most taxable services, such as professional services and advertising
services.
|
|
RM1,000,000
|
Applies to specific service
providers, such as financial services and insurance/takaful services.
|
|
RM1,500,000
|
Applies to specific service
providers, such as food and beverage and private healthcare services.
|
|
No threshold (compulsory
registration)
|
Prescribed service providers
who must register from the commencement of business, such as provision of
credit card service, private education services and services related to
release of goods from custom controls.
|
For a detailed breakdown of service categories and threshold for registration of service tax, please refer to Appendix 1 – Summarised First Schedule of STR 2018.
-
Registration Process
Application for service tax registration are submitted to the RMCD, through the MySST online system. A business that meets the liability criteria is required to apply within the stipulated timeframe, generally within one month after exceeding the threshold or from the commencement of business where compulsory registration applies.
Upon submission, the RMCD will review the application together with the supporting details provided. Once the application is approved, the business will be issued a Service Tax Registration Number. The registration takes effect from the date specified in the approval, which marks the commencement of business’s obligation to charge, collect and remit services tax.
Maintaining accurate records of taxable services is therefore crucial to support the registration process and ensuring ongoing compliance.
-
Consequences of Non-Registration
Failure to register for service tax when required carries significant implications under the Act. Where a person is liable but has not registered, the Director General may deem that person to be a registered service provider, thereby making them responsible for charging and accounting for service tax on their taxable services. In addition, non-registration exposes the business to penalties, including fines, imprisonment or both.
-
Conclusion
Registration and threshold requirements form the foundation of Malaysia’s service tax framework. By clearly defining who must register, when liability arises, and the consequences of non-registration, the system ensures that taxable services are consistently and fairly brought into the tax net.
For businesses, understanding these obligations is crucial to avoid unnecessary penalties and unexpected liabilities. Once registered, a taxable person must then move on to fulfilling ongoing responsibilities, including charging, collecting, and remitting service tax in accordance with the law.
For more details, please visit the official website of the Royal Malaysian Customs Department:
https://mysst.customs.gov.my/
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
KNOWLEDGE
