Malaysia increases SST rate as of 1 March 2024

The Sales Tax and Service Tax (SST) rate for most taxable services, including digital services provided by non-resident sellers, increases from 6% to 8% in Malaysia effective 1 March 2024.

What has changed?

As of March 1, 2024, the Sales and Service Tax (SST) rate has increased in Malaysia for most taxable services, including those offered by non-resident sellers of digital services. Previously at 6%, the rate has now been adjusted to 8%.

This new tax rate doesn't apply to essential services like food and beverages services, telecommunication services, logistics services, and vehicle parking, which remain taxed at the previous 6% rate.

The official legislation was published on February 26, 2024 (following what was presented on Malaysia's budget 2024).

Guidance for non-resident sellers of digital services

To ensure a smooth implementation of the change in the SST rate, the Royal Malaysian Customs Department (RMCD) has provided basic guidance for traditional services and separate guidance for non-resident providers of digital services.

Digital services in Malaysia mean any service delivered over the internet or other electronic network, which can only be obtained using information technology and where the service delivery is essentially automated.

Here's a quick breakdown of the key points of the transitional rules that service providers need to be aware of:

• Services provided and tax due before March 1, 2024: The old 6% SST rate applies.
• Services provided on or after March 1, 2024, with tax due on or after the effective date: The new 8% SST rate applies.
• Services spanning the effective date:
  • The portion before March 1st is taxed at 6%.
  • The portion on or after March 1st is taxed at 8%.
• Payments received before March 1, 2024 for services provided on or after the effective date: The old 6% SST rate applies to the received payment.

How can Fonoa help?

As a tax technology company, Fonoa understands the complexities of all forms of indirect taxes: Value-Added Tax (VAT), Goods and Services Tax (GST), Sales and Services Tax (SST) and US sales tax.

Service providers must stay vigilant and adapt swiftly to the latest changes in service tax rates and exemptions. Fonoa’s automated solutions guarantee that your tax calculations remain consistently up-to-date, incorporating the most recent legislative amendments, including the latest developments in Malaysia.

Get in touch to discover how we can help you take the complexity out of tax.