Malaysia VAT Guide - Avalara

Malaysia’s sales and service tax (SST) is an indirect tax imposed on goods and services at the provider level. SST was re-introduced in Malaysia on September 1, 2018, to replace the 6% Goods and Services Tax (GST).

Malaysian SST consists of two components — sales tax and service tax. Sales tax is levied on goods either manufactured in or imported into Malaysia. Service tax is levied on taxable services provided by registered businesses in Malaysia.

The Royal Malaysian Customs Department (RMCD) is responsible for the administration of SST.

SST rates in Malaysia

As part of Malaysia's tax systems, SST encompasses different tax rates based on the nature of the goods and services:

Sales tax at 10% — this is the standard sales tax rate in Malaysia, levied on taxable goods and imported taxable goods that are generally considered to be ‘luxury’ or non-essential.

Sales tax at 5% — a reduced rate sales tax that includes petroleum oils, construction materials, timepieces, and certain foodstuffs.
Service tax at 8% — a service tax rate applicable to all services except for food and beverage services, telecommunications, parking services, and logistics services.

Zero-rated supplies are taxable supplies taxed at a 0% SST rate, creating a distinction from exempted goods.

Malaysia SST rates

Rate	Type	Which goods and services
10%	Standard	Taxable and imported taxable luxury and non-essential goods.
6%	Standard	Restaurants, hotels and accommodation; car hire, rental, and repair; domestic flights; insurance; credit cards; legal and accounting; business consulting; electricity; telecoms; pay TV; digital supplies; night clubs, dance halls, cabarets, health and wellness centers, massage parlours, public houses, and beer houses; consultancy services; information technology services; management services; and employment services.
5%	Reduced	Basic foodstuffs; petroleum oils; construction materials; IT, telecommunications and printing hardware and materials; timepieces. Oil and petroleum are subject to quantity-based rates

What goods are exempted from sales tax?

Goods created for export purposes are exempt from sales tax in Malaysia. Perishable goods, printed materials, bicycles, and pharmaceutical products are also exempt.

SST registration

Resident businesses must register for SST if they exceed the annual turnover threshold of MYR 500,000. The registration process can be completed online at the RMCD My-SST portal. Upon completion of registration, businesses will receive a sales tax registration number.

Do foreign companies need to register for SST in Malaysia?

Foreign companies without a permanent establishment in Malaysia are generally not required to register for sales tax or service tax. Voluntary registration is not available in Malaysia for overseas businesses.

When do businesses have to file SST in Malaysia?

In Malaysia, the taxable period for SST returns is every two months. Businesses must file an SST return even if no tax is owed. Businesses must make their SST payments within 30 days from the end of the taxable period.

What is the penalty for not filing SST in Malaysia?

Failing to file SST in Malaysia could result in a financial penalty — a maximum fine of MYR 50,000. However, imprisonment is also a possibility. Failure to pay the SST collected to Malaysian authorities can also result in a maximum fine of MYR 50,000, or imprisonment.

For late payments of SST, additional charges ranging from 10–15% of the outstanding SST amount can be issued to businesses, depending on the number of days by which the payment is late.