Tax Whiz

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New and Updated Service Tax Guides

Guide on Management Services (Updated as at 1 Oct 2020)
Guide on Warehousing Management Services (New as at 6 Oct 2020)
Guide on Professional Services (Updated as at 6 Oct 2020)
General Guide on Service Tax (Updated as at 6 Oct 2020)

KPMG in Malaysia

13 October 2020

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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 Tax Whiz 2020 | New and Updated Service Tax Guides

New and Updated Service Tax Guides

The Royal Malaysian Customs Department (“RMCD”) has issued the following new and
updated Service Tax guides:
• Guide on Management Services (Updated as at 1 October 2020)
• Guide on Warehousing Management Services (New as at 6 October 2020)
• Guide on Professional Services (Updated as at 6 October 2020)
• General Guide on Service Tax (Updated as at 6 October 2020)

Please click here for copies of the Guides at the MySST portal. Set out below are some of the
salient points:-

(A) Guide on Management Services (as at 1 October 2020) – Available in Malay language only

 Management Services are taxable service subject to Service Tax under item (i) under Group
G of the First Schedule to the Service Tax Regulations 2018.

 Although amendments were made on 1 January 2019 to clarify further the types of activities
covered under management services, the amendments do not affect the liability of the
service provider to comply with the legislation since 1 September 2018.

 The provision of management services by any person is subject to Service Tax. Management
services which are taxable include:

(a) Project management services, full or part of the project

The Guide provides that service provider who manages a project (whether in full or partly)
and may involve a third party in executing the project, is providing a taxable service.

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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 Tax Whiz 2020 | New and Updated Service Tax Guides

(b) Tourism management services – deleted effective 1 September 2019

(c) Logistic management services – deleted effective 1 September 2019

(d) Maintenance management services

The Guide seems to distinguish the Service Tax treatment on maintenance services
provided by the service provider on goods, building or land owned by the customer and
owned by the service provider:

Example 4 – Building maintenance management services provided by Building

Maintenance Sdn Bhd to Kayaraya Sdn Bhd (the building owner) is subject to Service Tax

Example 5 – The rental and monthly charges imposed by Kayaraya Sdn Bhd (the building
owner) to its tenants are not subject to Service Tax because Kayaraya Sdn Bhd is
managing and maintaining its own assets and not providing any maintenance
management services.

The Guide also differentiates the Service Tax treatment between preventive maintenance
(subject to Service Tax) and corrective maintenance (not subject to Service Tax).

(e) Warehousing management services

A new Guide on Warehousing Management Services has been issued (please refer to
Part B).

(f) Collection and debt management services

The Guide provides that debt collection management services, whereby the service
provider ensure the debtors make payment and collects the debt for its customer are
subject to Service Tax. On the other hand, a debt reminder service, whereby the service
provider contacts the debtor through phone or sends notices, is not subject to Service
Tax.

(g) Car park management services

Operators who manage another entities’ car park and receive commission are providing a
taxable service.

(h) Sports facilities management services

Operators who manage sports facilities such as sports complex, stadium, competition
courts, sports equipment etc, are providing a taxable service.

(i) Secretarial management services

The Guide provides examples of secretarial management services which are subject to
Service Tax such as accounting, secretarial and related services.

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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 Tax Whiz 2020 | New and Updated Service Tax Guides

(j) Any management services other than specified in (a) to (i) made on behalf of another
person

The Guide provides examples of other management services made on behalf which are
subject to Service Tax (i.e. training management and event management) but also sets out
services which are not subject to Service Tax (i.e. transport management services and
waste collection and disposal services).

 The list of management services which are not subject to Service Tax are as per the Service
Tax Regulations 2018 i.e:

1. The management services in connection with land or building for residential use provided
by any developer, joint management body, management corporation or residential
association;

2. The management services provided by any person who is licensed or registered with the
Securities Commission Malaysia for carrying out the regulated activity of fund
management under the Capital Markets and Services Act 2007 [Act 671];

3. The management services provided by any person, Government agency, local authority or
statutory body for the purposes of religious, welfare, bereavement, burial, cemeteries,
cremation, sewerage, water supply, health, transport, tourism or logistic services;

4. The management services in connection with goods or land situated outside Malaysia or
other matters outside Malaysia

5. The management services provided to companies within the same group

 The value of the management services subject to Service Tax is the total value of services
invoiced to the customer.

 However, if the management services are provided by a third party, only the mark-up or
margin will be subject to Service Tax, provided the service provider is able to itemize the
respective services in the invoice as well as attach the third party’s invoice in the service
provider’s invoice to the customer.

If the service provider could not fulfil the above conditions or provides the services as a
package, then the entire services, including the services provided by the third party would be
subject to Service Tax.

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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 Tax Whiz 2020 | New and Updated Service Tax Guides

(B) Guide on Warehousing Management Services (as at 6 October 2020) – Available in Malay
language only

 Warehousing Management Services are taxable service subject to Service Tax under item
(i)(v) under Group G of the First Schedule to the Service Tax Regulations 2018.

 Although amendments were made on 1 January 2019 to clarify further the types of activities
covered under management services (including the insertion of warehousing management
services), the effective date for warehousing management services to be subject to Service
Tax is on 1 September 2018.

 Warehousing management services refer to services provided by warehouse operators which

cover arrangement and coordination of any activities exclusively prepared for the customers.
Warehouse operator refers to any person who manages a warehouse operation regardless
whether the warehouse is owned or rented.

 Examples of warehousing management services subject to Service Tax are (note that this list
is not exhaustive):

1. Handling
2. Loading and unloading
3. Sorting
4. Consolidation and de-consolidation
5. Labeling
6. Inventory control
7. Storage space
8. Pick and pack
9. Security

 The value of warehousing management services subject to Service Tax is the total value of
services invoiced to the customer. However, if the warehousing management services are
operated by a third party, only the mark-up or margin will be subject to Service Tax, provided
the service provider is able to itemize the respective services in the invoice as well as attach
the third party’s invoice in the service provider’s invoice to the customer.

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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 Tax Whiz 2020 | New and Updated Service Tax Guides

 The Guide illustrated some examples of the warehousing management services operation
and the corresponding Service Tax treatment, as follows:

Example 1

Warehousing management Logistic management*

Company A 6% Service Tax Not subject to

Company C* Service Tax
Warehouse Customer A
Third party
operator

* Viewed as providing logistic management services

Warehouse rental Warehousing management **

Company B Not subject to 6% Service Tax
Company C**
Warehouse Service Tax Customer B
Third party
owner

** Viewed as providing warehousing management services

Example 2

Warehouse Sdn Bhd

Customer
Warehouse owner and Taxable Service Non-Taxable Service
warehouse operator • Storage • Transportation of
• Repackaging goods
• Handling
• Documentation
• Security
• Auditing
• Other activities related to
warehousing

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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 Tax Whiz 2020 | New and Updated Service Tax Guides

(C) Guide on Professional Services (as at 6 October 2020)

 The Guide on Professional Services updates the scope of each of the following taxable
services under Group G of the First Schedule to the Service Tax Regulations 2018:

(a) Legal services

(b) Legal services on Islamic matters
(c) Accounting services
(d) Surveying services
(e) Engineering services
(f) Architectural services
(g) Consultancy, training and coaching services
(h) Information technology services
(i) Management services
(j) Employment services
(k) Safety or security services
(l) Digital services

 One notable update is the Service Tax treatment on office holders/ directors’ fees, as follows:

No Type of Payment Subject to Not Subject to

Service Tax Service Tax
1 Directors’ remuneration/ fee √

2 Directors’ allowances √
e.g: Meeting allowance, monthly allowance
3 Benefit in kind (BIK) √

4 Reimbursement or disbursement √

 Digital services, which was prescribed as taxable effective 1 January 2020, has been included
in the Guide.

 The Guide also updated the conditions for intra-group relief and the 5% “de minimis rule”, to
reflect the changes effected in the Service Tax Regulations 2018 on 1 January 2020.

 The Business to Business (B2B) Exemption from payment of Service Tax was also added in
the Guide.

(D) General Guide on Service Tax (as at 6 October 2020) – Available in Malay language only

 The General Guide provides an overview of the Malaysian Service Tax regime, covering the
scope, registration, accounting, returns/ declarations, exemptions and transitional rules.

 It has been updated to reflect the changes in the Service Tax legislations.

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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Contact us
Petaling Jaya Office

Tai Lai Kok Long Yen Ping

Executive Director – Executive Director –
Head of Tax and Head of Corporate Tax Head of Global Mobility Services
ltai1@kpmg.com.my yenpinglong@kpmg.com.my
+603 7721 7020 +603 7721 7018

Bob Kee Ng Sue Lynn

Executive Director – Head of Transfer Pricing Executive Director – Head of Indirect Tax
bkee@kpmg.com.my suelynnng@kpmg.com.my
+603 7721 7029 +603 7721 7271

Soh Lian Seng

Executive Director –
Head of Tax Dispute Resolution
lsoh@kpmg.com.my
+603 7721 7019

Outstation Offices

Penang Office Kuching & Miri Offices

Evelyn Lee Regina Lau
Executive Director – Penang Tax Executive Director – Kuching Tax
evewflee@kpmg.com.my reglau@kpmg.com.my
+604 238 2288 (ext. 312) +6082 268 308 (ext. 2188)

Kota Kinabalu Office Johor Bahru Office

Titus Tseu Ng Fie Lih
Executive Director – Kota Kinabalu Tax Executive Director – Johor Bahru Tax
titustseu@kpmg.com.my flng@kpmg.com.my
+6088 363 020 (ext. 2822) +607 266 2213 (ext. 2514)

Ipoh Office
Crystal Chuah Yoke Chin
Tax Manager – Ipoh Tax
ycchuah@kpmg.com.my
+605 253 1188 (ext. 320)

©© 2020
2020 KPMG
KPMG Tax
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Tax Services
Services Sdn.
independent member
member firms
Sdn. Bhd.,
Bhd., aa company
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affiliated with
company incorporated
with KPMG
incorporated under
KPMG International
under Malaysian
International Limited,
Malaysian law
Limited, aa private
law and
and aa member
private English
member firm
English company
firm of
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limited by
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 Tax Whiz 2020 | Report Name

KPMG Offices
Petaling Jaya Kota Kinabalu
Level 10, KPMG Tower, Lot 3A.01 Level 3A,
8, First Avenue, Bandar Utama, Plaza Shell,
47800 Petaling Jaya, Selangor 29, Jalan Tunku Abdul Rahman,
Tel: +603 7721 3388 88000 Kota Kinabalu, Sabah
Fax: +603 7721 3399 Tel: +6088 363 020
Email: info@kpmg.com.my Fax: +6088 363 022
Email: info@kpmg.com.my

Penang Johor Bahru

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Email: info@kpmg.com.my Email: info@kpmg.com.my

Miri
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Jalan MS 1/2,
Marina Square, Marina Parkcity,
98000 Miri, Sarawak
Tel: +6085 321 912
Fax: +6085 321 962
Email: info@kpmg.com.my

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although
we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or
that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough
examination of the particular situation.

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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© 2020
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The KPMG nameindependent
independent
KPMG Tax
and logo are
Tax Services
member
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trademarks
firms
Sdn. Bhd.,
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used underwith
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by the independent
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