The Royal Malaysian Customs Department ("RMCD") has on 27 May 2021 issued the Service Tax Policy No. 1/2021 which, amongst others, provides that the Minister of Finance has, pursuant to section 34(3)(a) of the Service Tax Act 2018 ("STA"), prescribed that effective 1 May 2021, the Malaysia-Thailand Joint Authority ("MTJA") and companies operating within the Joint Development Area ("JDA") are exempted from paying service tax on taxable services provided within the JDA by any company in the Principal Customs Area ("PCA") ("Service Tax Exemption").
Under Section 2 of the Customs Act 1967 ("CA"), the PCA refers to any part of Malaysia excluding a free zone, Labuan, Langkawi, Tioman and Pangkor, whereas, according to Section 2 of the STA, the JDA is assigned the meaning under Section 2 of the Malaysia-Thailand Joint Authority Act 1990 and is the area bounded by straight lines joining the following coordinated points and shown in the relevant part of the British Admiralty Chart No. 2414, Edition 1967:
It should be noted that to qualify for exemption, the services must be provided by a company in the PCA, that is, any part of Malaysia excluding a free zone, Labuan, Langkawi, Tioman and Pangkor.
Service Tax Policy No. 1/2021 further provides that the Service
Tax Exemption is subject to the following:
- Any service tax collected from customers between 1 September 2018 and 30 April 2021 must be remitted to the RMCD in accordance with Section 26 of the STA;
- Application from any person for refund of service tax paid before 1 May 2021 shall not be approved;
- Service tax for services which have been provided by service providers but have yet to be issued with an invoice or service tax which has been charged but has not yet been paid by the customers shall be given remission under subsection 40(1) of the STA; and
- The Service Tax Exemption does not apply to the importation of taxable services and digital services into the JDA.
As the Service Tax Exemption (which does not cover the importation of taxable services and digital services into the JDA) only took effect on 1 May 2021, any service tax collected prior to 1 May 2021 must still be remitted to the RMCD and any service tax paid prior to 1 May 2021 will not be refunded by the RMCD. However, service tax for services provided by service providers but have yet to be issued with an invoice or service tax which has been charged but has not yet been paid by the customers (which we believe refers to exempted services rendered after 30 April 2021) shall be remitted by the RMCD.
Originally published 04 June 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.