What is SST? Your guide to sales and service tax in Malaysia

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What is SST? Your guide to sales and service tax in Malaysia

If you are planning to expand your business into Malaysia, you are likely asking the question, What is SST?

SST refers to the Malaysian sales and service tax, where a sales tax is imposed at the manufacturer level, and a service tax is paid by consumers who are using taxable services.

Tax regulations are relatively fluid in Malaysia compared to neighbouring regions, which can make compliance challenging to maintain. This is why many growing businesses partner with a corporate services team who can help them navigate multi-country taxes as they evolve.

Read on as BoardRoom’s Tax Director for Malaysia, Cheong Woon Chee, provides an overview of how SST works, and what you can do as a taxable person to ensure compliance.

Did SST replace GST?

In 2018, the Malaysian Government reintroduced sales and service tax to replace the goods and services tax (GST), which reformed the local tax system.

“Many people actually believed that GST had increased the living cost since it was implemented,” Woon Chee says. “Therefore, the main objective of this abolishment was to put more purchasing power in the hands of the Malaysian people – especially the lower- to middle-income earners – which would result in a much higher disposable income.”

How SST works in Malaysia: definition and rates

SST is an indirect tax made up of the following components.

Sales tax

The sales tax component of SST is imposed on products manufactured and produced locally and on taxable goods imported into Malaysia. It is charged to consumers based on the purchase price of certain goods and services.

The sales tax is only imposed at one stage of the supply chain (at the time of the goods’ sale or disposal).

The sales tax rate in Malaysia ranges from 5%, 10% or another specified rate, depending on the type of goods.

Your business is required to pay SST if your total sales value of taxable goods has exceeded RM 500,000 in the past 12 months.

Service tax

The service tax is a consumption tax imposed on taxable services provided in Malaysia by a registered business.

The rate for service tax is 6% in Malaysia.

Your business is required to pay SST if your total value of taxable services within 12 months exceeds the prescribed threshold, which is usually RM 500,000. Some services have a different threshold (for example, the threshold for operators of restaurants and cafes is RM 1.5 million).

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How to register for SST

If your business’s annual income has exceeded the respective thresholds for sales or service tax, you need to register for SST on the MySST website. A tax professional can assist you with this process.

Is there anything or anyone exempt from SST in Malaysia?

In Malaysia, services that are imported or exported are exempt from service tax, as are goods manufactured for export.

Other exempted goods include:

Bicycles, including certain parts, and accessories
Books, newspapers, magazines, and journals
Live animals, meat, seafood, and eggs
Insecticides and disinfectant
Cereals
Coffee and tea
Fertilisers
Pharmaceutical products
Spices
Wood pulp

Manufacturers of non-taxable goods are exempt from SST, as are certain government bodies and educational institutions.

You can view complete lists of exempted goods, services and persons on the MySST website.

Exemption rules can be complicated, and the ramifications for tax evasion are severe. This is why it is a good idea to consult a tax professional who can help determine whether SST applies to your business.

Is SST different from company tax?

Another common question among businesses branching into Malaysia is, What is the company tax rate?

When it comes to understanding how to pay tax in Malaysia, business leaders should first learn the difference between SST and company tax.

While SST is imposed by the Royal Malaysian Customs Department, corporate tax is imposed by the Inland Revenue Board.

“Corporate tax is governed under the Income Tax Act 1967, which applies to all companies registered in Malaysia for chargeable income derived from Malaysia, including profits, dividends, interest, rentals, royalties, premiums, and other income,” Woon Chee explains.

Currently, the general rate for corporate income tax in Malaysia is 24%.

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What is required of businesses to comply with SST?

All companies doing business in Malaysia – no matter their size – should do the following to ensure compliance with SST:

Find out if you are liable for SST by checking the prescribed thresholds for goods and/or services
Determine if your business is eligible for exemption from SST (and apply for an exemption if eligible)

If your business is liable for SST, ensure that you:

Register for SST on the MySST website (check first whether you are already registered)
Charge service tax on your taxable service (if applicable)
Issue invoices in the national language or in English
File returns every two months
Make payments on time
Keep accurate records

Ensuring SST compliance can be an arduous process, which is why many businesses in Malaysia choose to engage a skilled corporate services provider for ongoing support.

What you may not know about Malaysian taxation

As a business leader, it is important that you stay aware of local taxation developments and discourse. With this knowledge, you will be able to make smarter decisions when it comes to company strategy and forward planning.

Some of the latest tax facts you should know include:

  • In its first year of implementation, Malaysia’s digital services tax brought in more than RM 400 million for the government. With the uptake of digital tools and streaming services on the rise, this indirect tax is likely to provide a significant revenue stream for the government in the years to come.
  • A tax exemption for SST on cars ended on 30 June 2022 after an extension was provided as part of the Malaysia Budget 2022. The exemption was introduced in 2020 to help automotive companies survive the impacts of the COVID-19 pandemic and also stimulate local economic growth.
  • Malaysia’s tax regulations are in a near-constant state of flux. Malaysia’s 2023 budget is set to be retabled, meaning businesses must be ready to adapt to potential new tax requirements in the near future.
  • Many companies find outsourced accounting and tax services benefit their business by ensuring they meet regulatory requirements, particularly as they grow and evolve.

Maintain SST compliance in Malaysia with the help of a tax professional

Navigating Malaysia’s tax landscape can be a complex and time-consuming exercise, especially for new businesses. In contrast to neighbouring countries, tax regulations and rates in Malaysia change so often that the tax research you performed at the start of your expansion journey may no longer be relevant just six months later, such as with the reintroduction of SST.

To ensure smooth and successful business growth, and to answer any of your questions about sales and service tax or otherwise, contact a local tax professional who can help ensure your Malaysian venture is fully compliant from the start.

Contact us to find out more.

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The impact of a great company secretary in modern Malaysia

The impact of a great company secretary in modern Malaysia

The impact of a great company secretary in modern Malaysia

How company secretary responsibilities are evolving in Malaysia

Historically, the responsibilities of a company secretary were limited to basic administrative tasks such as minute taking, annual return filing, editing company constitutions and other internal office duties. But the role is evolving as business management and corporate governance grow increasingly complex and gain greater importance.

In modern-day Malaysia, the company secretary is an executive-level role tasked with a wide range of important responsibilities across multiple business functions. As such, the company secretary plays a critical role in helping a business reach its maximum potential.

In this article, we explore the evolving role of a company secretary, and how a skilled company secretary can help your business gain a competitive advantage.

Why is a company secretary important?

Company secretaries carry out various duties to support the running of a business: importantly, they ensure full compliance with the Companies Act and related regulations.

If your goal is to succeed in business, particularly in competitive markets, do not underestimate the value of an experienced company secretary. They will be able to help elevate your governance practices in a way that maximises both benefits and performance.

Company secretarial services can include:

  • establishing the best structure for your business;
  • lobbying for the development of a strong environmental, social and governance strategy, known as ESG in Malaysia;
  • ensuring regulatory compliance; and
  • implementing contemporary corporate governance practices.

The company secretary acts as a voice of reason, ensuring your business pursues its goals with equal determination and integrity.

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The role of a company secretary in Malaysia

The rules and regulations for company secretarial services vary across the Asia-Pacific (APAC) region. In Malaysia, businesses are required by law to appoint a company secretary after incorporation.

Common duties for company secretaries in Malaysia include:

Participating in board meetings
Coordinating annual general meetings
Liaising with shareholders and directors
Keeping secretarial records of the company
Preparing and lodging annual returns
Obtaining certification of documents by local authorities
Handling the consolidation, division and transfer of shares
Performing ad hoc tasks on behalf of the board (e.g. signing bank or statutory statements).

Company secretaries can help at every stage of business, from registering a company to closing a company.

How has the company secretary role evolved?

While company secretaries used to have very little authority, today they are well-versed in local laws and regulations. This means the role has taken on a key business advisory function: directors and shareholders can seek the company secretary’s advice on the best way to handle compliance matters.

New focus areas for company secretaries include guiding the board on ESG and matters of legal compliance.

Environmental, social and governance

Rising expectations from regulators, investors and customers for strong ESG in Malaysia means businesses are under mounting pressure to demonstrate good governance. According to a 2020 KPMG survey, sustainability reporting in APAC has grown from 78–84% since 2017.

The company secretary’s broad involvement in both business operations and board activities means they have a crucial role to play in ESG advancement.

Company secretaries can support ESG performance by:

  • helping devise contemporary ESG measures (e.g. introduction of a whistleblower protection policy);
  • working collaboratively with the sustainability team to manage and control ESG risks and opportunities;
  • arranging regular ESG auditing; and
  • assisting with transparent ESG reporting in the company’s annual report.

 

    Legal compliance

    Keeping up with statutory requirements and advising updates to the legal team is a core responsibility of the company secretary. While the company secretary is not held accountable for legal decisions, directors and management teams must be able to trust that the company secretary’s compliance advice is reliable and up to date.

    On top of this, company secretaries must help the company prepare for all types of legislative uncertainty.

    Company secretaries support legal compliance in many ways, including:

    • planning and coordinating shareholder and board meetings and taking attendance;
    • preparing shareholder and board resolutions;
    • ensuring timely filing of all necessary ​​returns with the Companies Commission of Malaysia;
    • updating the Companies Commission on changes to statutory information;
    • ensuring compliance with Securities Commission legislation;
    • reviewing and preparing corporate governance reports for inclusion in annual reports; and
    • helping the company meet the requirements of Bursa Malaysia.

    The best company secretaries can develop tailored compliance solutions that satisfy requirements without costing unnecessary resources.

    Top challenges in company secretarial services

    Key qualities to look for in a company secretary include adaptability and strong communication skills. These attributes are crucial for overcoming common challenges in the compliance space.

    Here are the three main challenges company secretarial services may face.

    1. Keeping up with changing regulations

    The biggest obstacle for company secretaries is keeping their organisations compliant amid rapidly evolving regulatory landscapes. One way they support ongoing compliance is by working hand-in-hand with regulators.

    Company secretaries act as a vital link between organisations and authorities. They are able to access information about regulatory changes before they are made and can therefore help their organisation prepare in advance.

    This way, there is no big rush to adjust processes or take action once the changes come into effect.

      2. Developing tailored compliance solutions

      A successful compliance framework will look different for every business depending on its location, size, industry and listing status. This means company secretaries must have the skills to devise tailored business solutions for their organisation in line with the company’s constitution and within the framework of the Companies Act.

      When properly customised, a compliance framework supports a business to operate with integrity while also performing well in its industry.

      3. Obtaining buy-in from stakeholders

      Sometimes, companies fail to see the value of investing in a skilled company secretary. This is usually due to a poor compliance culture, where compliance is viewed as a burdensome box-ticking exercise rather than an opportunity to advance company goals.

      It is the responsibility of the company secretary to oversee compliance activities across the organisation.

      They should help the directors, shareholders and all staff to understand:

      • why statutory, regulatory and corporate requirements exist;
      • why the organisation must comply with these requirements; and
      • how the organisation and its people benefit from strong compliance.

      To ensure your business remains in strict compliance with all relevant requirements, make sure to appoint a company secretary that takes compliance very seriously.

      Corporate Secretary

      Partner with a company secretary you can trust

      If your company secretary lacks the right qualifications, skills or attitude to support good corporate governance, your business will be at risk of penalisation for failing to fulfil its compliance obligations. You may also miss out on valuable opportunities to improve your efficiency, productivity and profitability.

      Many organisations choose to streamline their operations by engaging in a reputable third-party corporate services provider. With this approach, executive staff can worry less about compliance obligations and focus more on business growth.

      Additionally, you can:

      Ensure your company incorporation is handled seamlessly
      Streamline your cross-border business administration
      Achieve multi-country compliance via one point of contact
      Receive vital business advisory services to support success in new regions
      Save time and money through a reduced administrative load
      Put more resources into achieving your primary objectives

      If your organisation has plans to expand across APAC, it is important to consider and prepare for the new set of regulations and cultural nuances each region will bring. You will also need to adhere to legislative requirements for any international partnerships you establish.

      The complexity of your operations can increase however if you engage corporate service providers in each region to meet relevant requirements.

      Corporate Secretary

      Gain a competitive advantage

      If your aim is to achieve successful business growth across APAC, BoardRoom provides a full suite of corporate services to suit your needs. Our Malaysian company secretary team stays up to date on regulatory developments and industry best practices to provide you with insightful advice every step of the way.

      To find out more about partnering with a skilled corporate secretarial team, chat with our specialists today.

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