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Goods and Services Tax (“GST”) in Malaysia will be introduced on 1 April 2015, with the Royal Malaysian Customs Department (“RMCD”) having administrative oversight of the GST regime. The official announcement on 25 October 2013 gives businesses a window of 17 months to prepare for the GST implementation.
At a glance, it appears to be similar to Singapore’s GST regime (e.g. place of supply rules, international services, and tax invoice format). However, subtle differences exist between the two. In order to prevent oversight and avoid missteps that will result in non-compliance or penalisation, Singapore companies with operations in Malaysia need to consider the following in their GST readiness plan:-
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(a) |
Complicated time of supply rule1; |
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(b) |
Reverse charge mechanism on imported services consumed in Malaysia. For example, the recipient of such services must account for 6% GST to RMCD on the foreign supplier’s behalf and remit the net amount due; |
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(c) |
Zero-rating (i.e. GST at 0%) extends beyond export and international services to also cover certain agricultural products (e.g. foodstuff, livestock, and treated water for domestic consumption); |
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(d) |
More exempt supplies classification (services such as childcare, private healthcare, and public transport) on top of financial services and residential properties; |
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(e) |
Capital goods adjustment; |
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(f) |
More tax coding; and |
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(g) |
Requirement for accounting systems to generate a “GST Audit File”. |
1 Malaysia looks at the earliest of goods removed/made available and/or performance of services, issuance of tax invoices or payment receipt date, subject to the 21-day rule. Singapore adopts simplified rules looking at the earliest of 2 events i.e. issuance of tax invoice or receiving of payment.
Challenges facing Singapore businesses in Malaysia
For Singapore businesses with operations in Malaysia, GST is compulsory for those with annual taxable turnover exceeding RM500,000. As it is a transactional tax administered on a self-assessment basis, it is important for these companies to ensure that they have accounted for the following in order to achieve accurate GST reporting and compliance:-
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(i) |
Designated internal GST team; |
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(ii) |
Detailed analysis of procedures that may be affected by the GST implementation; |
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(iii) |
Review of the businesses’ terms of trade or invoicing processes; |
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(iv) |
Updating/replacing of the existing accounting system to prepare it for GST reporting; |
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(v) |
Relevant tax coding(s) added to the accounting system; |
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(vi) |
Training of employees on GST concepts; |
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(vii) |
Review of employees’ benefits in the employment contracts; and |
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(viii) |
Additional time, manpower commitment and cost involved in the GST implementation. |
What should businesses do?
It is important for them to be “GST ready” by 1 April 2015. The necessary processes and controls must be in place and encapsulated in their accounting systems. More importantly, they must display the ability to file GST returns correctly and promptly.
What Should GRBs Do?
We can assist Singapore companies comply with GST requirements via the following:-
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(1) |
Dedicated sharing session with relevant business process owners on Malaysia’s GST concepts and its implications; |
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(2) |
Detailed business analysis on the various type of sales scenarios and purchase transactions, and its potential GST impact; |
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(3) |
GST consultation; |
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(4) |
GST implementation services; and |
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(5) |
Post-GST support. |
Contact our team of GST professionals:
Richard Ong, Director & Head
Accredited Tax Advisor (GST)
T +65 6594 7821
richardong@rsmchiolim.com.sg |
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Huang Yanlin, Manager
Accredited Tax Advisor (GST)
T +65 6594 7306
huangyanlin@rsmchiolim.com.sg |
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Lee Meow Ling, Manager
T +65 6594 7305
leemeowling@rsmchiolim.com.sg |
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Victor Poon, Assistant Manager
Accredited Tax Practitioner (GST)
T +65 6594 7304
victorpoon@rsmchiolim.com.sg |
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