Service Tax Invoice Requirements in Malaysia
Issuing a proper service tax invoice is a cornerstone of compliance under Malaysia’s Service Tax Act 2018 (referred to as “the Act”). For registered businesses, a service tax invoice is not merely a commercial document; it is a statutory instrument that evidences a taxable transaction and establishes the business’s legal obligation to account for, collect and remit service tax to the Royal Malaysian Customs Department (“RMCD”).
A correctly issued invoice promotes transparency with customers and supports accurate tax reporting. Conversely, incomplete, inaccurate or late invoices can result in compliance breaches, financial penalties and disputes.
This article outlines the key requirements for service tax invoices in Malaysia, covering statutory obligations, mandatory particulars, simplified invoicing, electronic invoices and the consequences of non-compliance.
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Obligation to Issue a Service Tax Invoice
Under Section 21 of the Act and the Service Tax Regulations 2018, every registered person providing taxable services shall issue a service tax invoice to the customer. This obligation applies to all recipients, including individuals, businesses and government entities.
In the general guideline to service tax issued by the Customs state that invoice shall be issued within one (1) year from the date of the:
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Taxable service is provided; or
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Such extended period as may be approved by the Custom.
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However, subject to certain circumstances, a registered person may apply to the custom to not issue an invoice.
Timely issuance ensures that the collection and remittance of service tax to the RMCD aligns with the actual taxable event. It also provides customers with proper documentation for their accounting and regulatory purposes.
It is important to note that invoice with service tax is not permitted to be issued for/by:
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Services that are not taxable under the Act; or
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Persons who are not registered for service tax.
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Issuing invoices in these circumstances is considered an offence and may expose the business to penalties or prosecution. Compliance with this obligation is therefore essential to avoid legal and financial risks.
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Mandatory Particulars of a Service Tax Invoice
To be valid under the Act, a service tax invoice must include certain prescribed particulars. These requirements ensure transparency for customers and enable the RMCD to verify compliance during audits.
Failure to include any of the mandatory particulars may render the invoice non-compliant, potentially exposing the business to penalties under the Act. Businesses should regularly review their invoicing systems to ensure all statutory requirements are consistently met.
The mandatory particulars are summarised in the table below:
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Required Particular
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Purpose
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Invoice serial number
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Provides a unique reference for
each transaction.
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Date of the invoice
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Establishes the date of
issuance and timing for compliance
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Name, address and identification
number of the registered person
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Identifies the service tax
registered supplier
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Description sufficient to identify
the taxable services provided
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Specifies the nature of the
taxable service
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Any discount offered
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Discloses reductions from the
service value, if applicable
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Total amount payable excluding
service tax
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States the value of the service
before tax
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Rate of service tax
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Shows the applicable service
tax rate
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Total service tax chargeable (shown
separately)
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Specifies the exact amount of
service tax imposed
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Total amount payable inclusive of
service tax
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Reflects the final charge to
the customer
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Amounts in a foreign currency also
expressed in Ringgit Malaysia (RM)
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Ensures clarity by converting
into RM at the prevailing selling rate of exchange when services are provided
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Language of the invoice: Bahasa
Melayu or English
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Ensures compliance with
statutory language requirements
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By ensuring all these particulars are accurately included, businesses maintain compliance and reduce the risk of dispute or penalties.
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Credit Notes and Debit Notes
When adjustments are required to a previously issued service tax invoice, such as for discounts, overcharges, undercharges or returned services, the registered person must issue a credit note or debit note.
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Credit Notes are issued to reduce the amount originally invoiced or the transaction is cancelled, including service tax where applicable.
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Debit Notes are issued to increase the amount originally invoiced, including service tax where applicable.
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All credit and debit notes must include following particular:
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The words “credit note” or “debit note” clearly displayed;
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Serial number and date of issue;
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The name, address and service tax registration number of the registered person;
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Reason for issuing the credit note or debit note;
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A description sufficient to identify the taxable services;
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Quantity and amount of each taxable service;
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Total amount excluding service tax;
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Rate and amount of service tax; and
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Number and date of invoice issued for the relevant taxable services.
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Issuing credit and debit notes ensures that both the supplier and customer maintain accurate records of adjustments, while providing the RMCD with a transparent trail for verification. Proper handling of these documents is essential to maintain compliance under the Act.
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Record-Keeping Requirements
Service tax registered persons are required to retain copies of all service tax invoices, credit notes, debit notes and any cancelled invoices for a minimum period of seven (7) years. This obligation applies whether the records are maintained in physical or electronic form and must be satisfied within Malaysia.
The retained records must be:
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Complete – All documents must be kept in full, without alteration or omission.
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Legible – Records should remain clear and readable throughout the retention period.
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Accessible – Documents must be readily available for inspection by the RMCD upon request.
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Proper record retention is essential for demonstrating compliance and ensuring transparency in financial reporting. Failure to comply with these requirements may result in penalties under the Act and increase compliance risks during RMCD inspections.
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Compliance Risks
Non-compliance with service tax invoicing requirements under the Act can result in financial penalties, audit scrutiny, disputes with customers and reputational damage. Common breaches include failing to issue invoices, issuing incorrect invoices or not retaining proper records. Adhering to statutory requirements and maintaining robust invoicing and record-keeping systems helps mitigate these risks and ensures smooth interaction with the RMCD.
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Conclusion
Service tax invoices are statutory documents essential for compliance under the Act. Proper issuance, management, and retention of invoices ensure accuracy, transparency, and smooth dealings with the RMCD while mitigating risks of penalties and audits.
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
