Service tax for logistics and digital services gazetted

Service tax rate rises to 8%

Malaysia's service tax on logistics and digital services, announced in Budget 2024, has now been gazetted. Under the Service Tax (Rate of Tax) Amendment Order signed by Finance Minister II Datuk Seri Amir Hamzah Azizan, the prevailing 6% rate rises to 8%.

Logistics services tax

For logistics services, a separate gazette sets the taxable service threshold at RM500,000. Exemptions apply to courier services for documents, packages or goods that both originate and are ultimately destined outside Malaysia (even if they exit via a Malaysian point), as well as goods arriving at Malaysian ports or airports purely for transfer between vessels or aircraft before continuing onward out of the country. Delivery, distribution and transport services — including e-commerce courier services handled on behalf of another party — are covered by the tax, with food and beverage delivery specifically excluded. Karaoke centres, repair and maintenance services, and brokering and underwriting services are also brought under the tax, except for medical insurance/takaful borne by an individual, life insurance or family takaful, and matters relating to goods, land or other assets located outside Malaysia.

Digital services tax

A separate Service Tax (Rate of Digital Services Tax) (Amendment) Order 2024 takes effect from 1 March 2024. Under its transitional rules: digital services that span both sides of that date are taxed at 8% only on the portion of the service delivered after 1 March, based on the value charged by the foreign registered provider; and for services provided on or after 1 March where payment was received before that date, the service tax on that payment is charged at the earlier 6% rate.

Source: The Star