A. Service Tax on Imported Taxable Services
With effect from 1st January 2019, taxable service acquired by any person in Malaysia from any person who is outside Malaysia for the purpose of business will be subject to 6% imported service tax. This will include taxable services acquired by person not registered under sales and service tax.
Type of Imported Taxable Services Subject to Service Tax
Taxable Imported services shall be the taxable services as prescribed under First Schedule of Service Tax Regulation 2018. Generally, this would include professional services such as legal services, IT services, digital services, engineering services, architectural services, management services etc. The service tax is to be borne by the payer of the fees for such services.
Businesses that have been charged service tax on imported digital services by Foreign Registered Person is not required to account for service tax on the same imported taxable services. Please refer to Part B of this article for further explanation on digital services acquired from foreign registered person.
Imported taxable services eligible for the above exemption are as follows:
Professional services under Group G (except employment and private agency services)Advertising services under item 8, Group I, First Schedule of the Service Tax Regulations 2018
Penalty for Non-Compliance
Any person who fails to comply with the above requirement shall, on conviction, be liable to a fine not exceeding thirty thousand ringgit or to imprisonment for a term not exceeding two years or to both.
B. Digital Services Acquired from Foreign Registered Person (FRP)
With effect from 1st January 2020, local businesses are not required to self-account for the 6% service tax on the imported digital services acquired from foreign registered persons. The reason is that the foreign registered person will impose a 6% service tax on the digital service rendered to the consumer in Malaysia.