By Majella Gomes

The Service Tax, which takes effect on 1 January 2019 is expected to further improve the efficiency and effectiveness of the SST. With this tax, the government is setting in place mechanisms to protect the competitiveness of local industry and prevent increases in the cost of doing business due to compounded taxation. However, professional services under group G will be exempt.

Almirulita Mohd Yusoff

Imported services. These are taxable effective 1 January 2019 to ensure equal treatment for services supplied by both local and foreign service providers. From 1 January 2020, foreign service providers that offer downloadable services such as software, music, video or digital advertising will also be subject to tax, in order to neutralise the cost disadvantage faced by physical retailers against the virtual storefront.

Grey Areas. The regulators are updating their systems to manage the changes and amendments and to address grey areas, e.g. purchases of small bespoke components made by non-registered manufacturers. From 1 January 2019, registered manufacturers who purchase taxable goods on which sales tax has been paid by non-registered traders, can apply for deduction of sales tax, subject to conditions. Registered manufacturers may also acquire goods from non-registered suppliers and claim the deduction.

Sugar Tax. Under the imposition of the “Sugar Tax”, sugar-sweetened beverages will be subject to excise duty to address the issues of rising diabetes and obesity. Effective 1 April 2019, RM0.40 in tax will be applied per litre to manufactured beverages (including carbonated beverages, vegetable and fruit juices) with sugar content exceeding 5gm per 100ml.

Sin Taxes. Amendments to the Customs Bill 2018 and the Excise Bill 2018 now allow increased punishment – specifically mandatory whipping – for smuggling of illicit cigarettes and illicit intoxicating liquor. This measure will improve revenues, as the government hoped to recover at least RM1 billion in tax losses by clamping down on smuggling and fraudulent activities.

Amirulita stressed the importance of maintaining accurate records, and that new measures were being put in place to circumvent or address the former misuse or abuse of the system e.g. manipulation of records leading to large losses in government taxation revenue.

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