Crowe Chat (Special Edition)
Highlights of the Indirect Tax (Amendment) Bills 2020
The following indirect tax amendment Bills were tabled for their first reading on 10 December 2020 in Parliament:
- Sales Tax (Amendment) Bill 2020
- Service Tax (Amendment) Bill 2020
- Customs (Amendment) Bill 2020
- Excise (Amendment) Bill 2020
- Free Zones (Amendment) Bill 2020
- Windfall Profit Levy (Amendment) Bill 2020
- Tourism Tax (Amendment) Bill 2020
The amendments are mostly consequential corrections. This Crowe Chat (Special Edition) discusses some of the major highlights of the Bills.
Details of Proposed Measures, Effective Date and Commentary:
Present
Based on the existing Sales Tax Act and Service Tax Act, a registered person shall cease to be liable to be registered at the end of any month where the Director General is satisfied that the total sales value of all his taxable goods in that month and the 11 months immediately succeeding that month (i.e the coming period of 12 months) does not exceed the total sales value of taxable goods or taxable services in that same period (i.e. the prescribed threshold).
Proposed
It is proposed that a registered person who intends to cancel his Sales Tax or Service Tax registration is required to prove to the Director General of RMCD that the total value of his taxable goods or taxable services for the past 12 months does not exceed the prescribed threshold.
Effective Date
Upon coming into operation of the Sales Tax (Amendment) Act 2020 and Service Tax (Amendment) Act 2020.
Commentary
Currently, registered persons are allowed to use their forecast or estimated sales value to prove that the total value of taxable goods or taxable services would not exceed the prescribed threshold (i.e. based on the future method) for the cancellation of the Sales Tax and/or Service Tax registration. However, there is a concern that the registered persons may have used forecasted or estimated values which may not be accurate and which may be subject to change depending on circumstances.
Therefore, it is proposed that all registered persons who wish to cancel their Sales Tax and / or Service Tax registration are required to prove to the RMCD that the value of their taxable goods or taxable services in the past 12 months does not exceed the prescribed threshold (i.e. based on the historical method).
This amendment shall not be applicable to registered persons who cease to carry on the business of providing taxable goods or taxable services (except for the registered persons who temporarily ceased or suspended providing taxable goods or taxable services). Therefore, the first group of registered persons mentioned can still proceed to cancel their Sales Tax and/or Service Tax registration.
Present
Taxpayers may have tax refunds of Sales Tax or Service Tax due to various reasons such as the issue of credit notes by the taxpayer to its customers. If the tax refund exceeds the tax payable by the said taxpayer in that taxable period, the net amount will not be refunded by the RMCD.
Proposed
A registered person may deduct the amount of tax refund against the amount of Sales Tax or Service Tax to be paid to the RMCD in the SST-02 return. The balance of the refund amount shall be refunded by the RMCD to the registered person or credited against the Sales Tax or Service Tax to be paid in the subsequent taxable period.
Any person who improperly obtains a deduction of the Sales Tax or Service Tax refund commits an offence and shall, on conviction, be liable to:
(a) a fine not exceeding RM50,000 or to imprisonment for a term not exceeding 3 years or to both; and
(b) a penalty of 2 times the amount deducted in excess of the amount properly so deductible.
Effective Date
Upon coming into operation of the Sales Tax (Amendment) Act 2020 and Service Tax (Amendment) Act 2020.
Commentary
This new proposed measure is aimed to ease the cash flow of the taxpayers. This is especially so when a taxpayer has insufficient Sales Tax or Service Tax payable to be offset against the Sales Tax or Service Tax refund in that particular taxable period.
Present
Presently, Section 40 of the Service Tax Act 2018 does not give the following persons the authority to remit or reduce the Service Tax, etc, of foreign registered persons:
(a)the Minister of Finance (“MOF”) may not remit or reduce the Service Tax due and payable; and
(b)the Director General of RMCD may not remit or reduce the surcharge accrued, penalty, fee or other money payable to the RMCD.
Proposed
It is proposed that the same remission of Service Tax, etc. be given to foreign registered persons under Section 40 of the Service Tax Act 2018.
Effective Date
Upon coming into operation of the Sales Tax (Amendment) Act 2020 and Service Tax (Amendment) Act 2020.
Commentary
Based on the existing legislation, the MOF or the Director General of RMCD is not empowered to remit the Service Tax, etc. of the foreign registered persons. With this proposed measure, foreign registered persons will benefit if they have reasonable grounds to justify the remission of their Service Tax.
Present
Presently, only an operator who operates accommodation premises in Malaysia shall be liable to be registered for Tourism Tax (the operator is known as a “registered operator”). In short, only the registered operator can impose Tourism Tax.
Tourism Tax is a tax imposed by the government on foreign tourists who stay at accommodation premises such as hotels in Malaysia. This tax is collected by the operators of accommodation premises and is levied at RM10 per room per night.
Proposed
It is proposed that a digital platform service provider who provides services relating to online booking of accommodation premises in Malaysia shall also be liable to be registered for Tourism Tax (“registered digital platform service provider”), regardless of whether the digital platform service provider is in Malaysia or outside Malaysia.
“Service relating to online booking accommodation premises” means any online service relating to the booking of accommodation premises that is delivered automatically over the internet or any other electronic network (“Relevant Service”).
The digital platform service provider who is liable to be registered for Tourism Tax is required to apply for the registration before 1 July 2021 (i.e. effective date). The application for the said registration can be made on or after 1 April 2021 (i.e. 3 months before the effective date).
The digital platform service provider who provides the Relevant Service in respect of accommodation premises in Malaysia, is required to apply for registration within 30 days from the date the digital platform service provider provides the Relevant Service.
Effective Date
Upon coming into operation of the Tourism Tax (Amendment) Act 2020. The proposed effective date is 1 July 2021.
Commentary
The following summarizes the obligations of the registered digital platform service provider:
- Tourism Tax Rate: RM10 per room per night
- Taxable Period: Three (3) months
- Return and Payment: Return and payment shall be furnished and paid not later than the last day of the month following after the end of the taxable return to which thereturn relates.
- Record Keeping: Any record kept shall be preserved for seven (7) years from the latest date to which the records relate.
The existing exemption from payment of Tourism Tax by a Malaysian individual (i.e. Malaysian national or permanent resident of Malaysia) will also be applicable for bookings through an online platform. To properly identify the tourist, the registered digital platform service provider should obtain the identification details of the tourist (e.g. name, passport number or Identification Card number of the tourist, etc.) for each booking.
To avoid a tourist having to pay double Tourism Tax, the registered operator should not impose and collect the Tourism Tax if the tourist can prove that the Tourism Tax has been paid to the registered digital platform service provider.