Understanding Sales Tax and Service Tax: A Guide to Company Registration in Malaysia
Understanding and complying with Sales Tax and Service Tax regulations is crucial for businesses operating in Malaysia. Manufacturers producing taxable goods and service providers offering taxable services need to be clear about their tax responsibilities and registration requirements. This guide will detail the registration requirements, applicable entities, payment methods, and other relevant regulations for Sales Tax and Service Tax, helping businesses better fulfill their legal obligations and ensure compliant operations.
I. Sales Tax
1.1 Registration Requirements
Manufacturers producing taxable goods need to register for Sales Tax under the following circumstances:
When the sales of taxable goods exceed RM500,000 within 12 months.
When the value of subcontracted work for taxable goods exceeds RM500,000 within 12 months.
1.2 Types of Taxable Goods
Taxable goods include:
Goods produced by registered manufacturers, unregistered manufacturers, and manufacturers in special areas (such as Free Industrial Zones (FIZ) and Licensed Manufacturing Warehouses (LMW)).
1.3 Voluntary Registration
Manufacturers can choose to register voluntarily even if their sales of taxable goods do not meet the registration threshold.
1.4 Conditions for Exemption from Registration
The following manufacturers are exempt from registering for Sales Tax:
Manufacturers of non-taxable goods.
Manufacturers whose sales have not reached the threshold.
Manufacturers carrying out specific exempt manufacturing activities, such as price-controlled goods, pharmaceutical products, dairy products, perishable goods, printed materials, bicycles, and export-exempt goods. From January 1, 2024, manufacturing auxiliary tools and cleanroom equipment will also be exempt.
1.5 Sales Calculation Method
Manufacturers should calculate the sales of taxable goods within 12 months using the following two methods:
Historical method: Total value of taxable goods in the current month and the previous 11 months.
Future method: Total value of taxable goods in the current month and the following 11 months.
II. Service Tax
2.1 Registration Requirements
Service providers offering taxable services and whose annual turnover reaches or exceeds the registration threshold of RM500,000 must register for Service Tax.
2.2 Service Tax Rate
From March 1, 2024, the Service Tax rate has been increased from 6% to 8%, mainly affecting demand services and inter-business activities not directly involving the public. The service tax for food and beverage, parking, logistics, and telecommunications will remain unchanged.
2.3 Turnover Calculation Method
Businesses providing taxable services should calculate the turnover of taxable services within 12 months using the following two methods:
Historical method: Total value of taxable services in the current month and the previous 11 months.
Future method: Total value of taxable services in the current month and the following 11 months.
2.4 Voluntary Registration
If the turnover of taxable services does not reach the registration threshold, service providers may choose to register voluntarily, subject to certain conditions and at the discretion of the Director General.
If you are considering registering a company in Malaysia, establishing a new factory, etc., FOZL is your best choice. We have extensive experience and a professional team dedicated to providing customized solutions for our clients. Please contact the FOZL team, and we will be happy to assist you.
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