Malaysian PM Strongly Supports Goods and Services Tax

Posted by Reading Time: 4 minutes

A range of Malaysian politicians have strongly criticized the country’s recently implemented goods and services tax (GST), causing Prime Minister Najib to step into the fray and reiterate his reasons for the new tax.

Malaysia introduced the tax on April 1, 2015. GST is a value added consumption tax payable by all parties in the production chain, but refunded to all except the final consumer. Malaysia’s six percent GST, the lowest in Southeast Asia, replaces its 10 percent sales tax and six percent services tax.

Chief among the criticisms against the GST are that it will make Malaysia less competitive vis-à-vis other countries in the region by raising the country’s tax burden, as well as hurting economic growth.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Tax and Compliance Services

However, Prime Minister Najib has answered this criticism by stating that the GST will widen the country’s tax base – currently only one in 10 Malaysians pay any personal income tax. Additionally, according to Najib, the GST will reduce the government’s dependence on revenues from oil and gas, which make up 23 percent of current revenue. In particular, GST should support exporters since many exports will be zero-rated.

The implementation of GST has been an increasingly common sight throughout ASEAN. Besides Malaysia, only Brunei and Myanmar have not implemented the tax regime. Throughout the world, more than 160 countries have some form of GST already in place.

What does Malaysia’s GST actually do?

According to Malaysia’s GST laws, any business who has made taxable supplies exceeding MYR500,000 (~US$137,000) in the prior 12 months is required to register for the new tax.

Related-Reading-Icon-Asean LinkRELATED: Malaysia GST Implementation on April 1, 2015

Malaysia’s Customs Department has divided taxable supplies into four groups:

  1. Standard rated: Taxable goods and services subject to GST at a standard rate
  2. Zero-rated: Goods and services subject to a zero percent GST rate, in which consumers pay no GST and businesses claim a GST refund on inputs
  3. Exempt Supplies: Goods and service supplies not subject to consumer GST but for which businesses will not receive a refund of GST paid on inputs
  4. Supplies not within the scope of GST: Non-business transactions, sales of goods outside of Malaysia, and services provided by the government sector

Exempt supplies will mainly include such purchases as fruits and vegetables, as well as other products such as cosmetics, medicines, kitchenware, clothes, and books.

For manufacturers operating in Malaysia, local and imported manufacturing inputs such as capital assets, raw materials and components, and services and utilities are subject to GST, except zero-rated and exempt supplies. In order to avoid double taxation, manufacturers are allowed to claim input tax credit on any purchases that are inputs to their business.

It is recommended that businesses contact a tax expert in the region in order to ensure proper GST compliance.


About
Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asean@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related-Reading-Asean Book Title

Tax, Accounting, and Audit in Vietnam 2014-2015
The first edition of Tax, Accounting, and Audit in Vietnam, published in 2014, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in Vietnam in order to effectively manage and strategically plan their Vietnam operations.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.

 

 

The 2015 Asia Tax ComparatorAB 1214 Cover small small
In this issue, we compare and contrast the most relevant tax laws applicable for businesses with a presence in Asia. We analyze the different tax rates of 13 jurisdictions in the region, including India, China, Hong Kong, and the 10 member states of ASEAN. We also take a look at some of the most important compliance issues that businesses should be aware of, and conclude by discussing some of the most important tax and finance concerns companies will face when entering Asia.