International SST Guides – Malaysia
SST rates in Malaysia
How much is SST in Malaysia?
Three important types of consumption taxes should be considered regarding e-commerce transactions and the supply of digital services in Malaysia.
What consumption tax will be imposed on the underlying supply depends on the supply type, who is deemed the supplier, and who is responsible for charging the fee. These types of taxes are:
- Services Tax – The standard rate of Services Tax is 8%(levied on the provision of digital services by foreign providers);
- Sales Tax – The standard rate of Sales Tax is 10%( levied on e-commerce sales by foreign online vendors);
- Tourism Tax – levied on a flat rate by a service provider or digital platform operator that facilitates the supply of service.
There is a reduced Malaysia SST rate in circulation.
Different kinds of supplies of goods or provision of services are exempted from SST. Some exempted supplies are the State of Fiscal Stamps’ imports or direct sales, postage stamps, and stamped papers. This group can also include insurance services and healthcare services.
| Malaysia SST Rate | Rate Type | Coverage and imposition | |
| Service Tax | 8% | Standard Rate | This applies to all taxable supplies in the country besides those that can benefit from being zero-rated or SST-exempted |
| Sales Tax | 10% | ||
| Service Tax | 6% | Reduced rate | Brokerage and underwriting services for non-financial services, telecommunication services, parking space provision services, delivery services |
| Sales Tax | 5% | Certain food products, construction material | |
| 0% | Zero Rate | Exports of goods, pharmaceutical products | |
The Malaysian indirect tax system is challenging for non-resident economic operators. When we compare the EU Member States’ VAT regulatory framework and the SST Malaysia system in place, we can see quite a few differences in how they are implemented.
Foreign online vendors of goods and foreign providers of digital services are part of the specifically designed registration and reporting system.
SST threshold in Malaysia
With accompanying amendments, the Services Tax Act and the Sales Tax Act are the primary source of truth when understanding how these taxes are implemented. The Malaysian Tax Authority acts expeditiously when preparing practical Guidelines before and after adopting amendments to principal regulations.
SST registration threshold for resident businesses: A threshold of MYK 500,000 calculated based on any 12-month.
SST registration threshold for non-resident businesses: Non-resident businesses without a fixed place of business can benefit from the threshold of MYK 500,000 based on any 12-month calculation period if they prefer to register voluntarily.
SST registration threshold for foreign providers of digital services: Threshold of MYK 500,000 based on any 12-months.
SST Taxable Activities in Malaysia
Different types of economic activities could trigger the obligation to be SST Malaysia registered:
- Supply of goods and services against payment;
- Exports of taxable goods;
- Imports of goods and services;
- Supply of digital services and e-commerce transactions;
- Import of Low-Value-Goods(LVG).
The Malaysian Revenue Agency found it challenging to adopt the governing tax provisions for foreign sellers of goods who make their supplies directly through their websites or digital marketplace facilitation services.
The Revenue Authority has prepared numerous guidelines and explanatory documents to help people understand the rules concerning e-commerce transactions. At the start of 2024, the scope of Malaysian SST was expanded to include sales of LVG to local customers by non-resident suppliers.
The Government of Malaysia has also mandated that foreign providers of digital services levy Service Tax on providing digital services and selling digital products to customers based or residents of the country.
Tax Representative in Malaysia
In most cases, non-resident vendors should seek the assistance of a local tax agent.
Tax registration
Standard Registration
Domestic and foreign businesses with local establishments should follow the standard registration procedure. The mandated documentation should be submitted online.
Simplified Registration
Foreign providers of digital services and e-commerce vendors of LVG should register electronically for SST following the rules specifically designed for these types of transactions.
SST on Electronically Supplied Services in Malaysia
Digital Services
Considering the applicable SST provisions, foreign e-commerce and digital platform operators should register for SST in Malaysia when the place of supply of the taxable activity is in the country. When the threshold is reached, they should follow the mandatory registration procedure.
After registration, they should track both B2B and B2C supplies and provide adequate invoices for each transaction to their customers.
How much is SST in Malaysia for Electronically Supplied Services?
SST rate Malaysia: Service Tax rate of 8% should be levied for the supply of digital services by non-resident suppliers
| Example of taxable ESS in Malaysia ↓ |
| Supply of digital products, such as software, connected changes, and updates of the software |
| Services that can be downloaded through the internet and saved on computer and/or mobile devices |
| Supply of music, films, and games |
| Supply of distance learning |
| Access or download of music to a physical device |
| Access or downloading of images, jingles, films, ringtones, and other audio output |
Invoicing Rules
Foreign providers of digital services should familiarize themselves with Malaysia’s e-invoicing and invoicing rules before they start issuing accounting documents to their customers. Properly understanding the issuer’s sales volume and business model makes it easier to determine what kind of supporting document the supplier needs to issue.
There are different types of invoicing requirements for domestic and international suppliers. The gradual introduction of the electronic invoicing system has reshaped the invoicing process. To fully comply with the Malaysia Sales and Services Taxes, the regulations that define the invoicing rules, the taxable person should search following the type of the supply is making, what customers are in its scope, and what the sales threshold reached or future in the calendar year.
Some providers of digital services and e-commerce sellers are mandated to issue structured e-invoices to their customers upon request of the customer. At the same time, others can issue unstructured e-invoices and report the transaction data through summary invoices.
Invoice Requirements in Malaysia
The invoice should at least contain the following:
General information:
- Date of invoice issuance;
- Unique invoice number and series.
Seller information:
- Company name;
- Full address (head office);
- Billing address if different from company address;
- SST number.
Customer information:
- Name;
- Full address;
- SST number (if applicable).
Fiscal Information:
- Description and breakdown of the goods or services – quantity, discounts, unit price, excl. SST;
- SST amount;
- Invoice Total.
Foreign Currency Invoice in Malaysia
The invoice could be issued in foreign currency. However, local currency should also show the tax payable and the total amount.
Reporting is done in local currency.
SST Return in Malaysia
Standard Return
Taxpayers with a place of business in Malaysia(domestic businesses) and foreign businesses with a physical presence in the country should collect and remit taxes according to the standard procedure.
Simplified Return for ESS suppliers
| SST Return Name | DST-02 Return |
| Filling frequency | Quarterly |
| Online Filling | Mandatory |
| Annual Return | No |
| Filing deadline | Last day of the month following the reporting period |
| Payment deadline | Last day of the month following the reporting period |
| Payment currency | MYR |
| Language | English or Malay |
| Local VAT acronym | SST( Sales and Services Tax) |
Penalties for late reporting and omitted declarations
If a taxable person makes a late payment, late registration, or erroneous declaration, different types of penalties could be assessed against the non-compliant taxable person.
Failure to comply with the tax provisions of the Service and Sales Taxes in Malaysia will be treated as an offense. The non-compliant taxable person could expect a fine, interest, or even criminal prosecution for its non-compliant behavior.
Some of the misdemeanors that will lead to enforcement of penalties:
Penalties for late submission: Failure to submit tax returns can result in a fine of up to MYR 50,000, a prison term of up to three years, or both.
Penalties for late payment: Penalties for late payment of tax due are dependable on the amount of time that has passed since the statutory deadline for payment
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