If you’re an entrepreneur or a small business owner planning to expand your business or set up a company in Malaysia, you will inevitably encounter the term “SST” at some point. The Sales and Service Tax (SST) system is a crucial aspect of the Malaysian tax landscape. It replaced the Goods and Services Tax (GST) in 2018, and understanding how it works is vital for anyone looking to start a business in Malaysia. SST consists of two main types: Sales Tax, which applies to goods, and Service Tax, which applies to services. Both taxes are essential for businesses to consider when planning their operations. As a business owner, you’ll need to ensure that your company complies with the appropriate SST rates, which can range from 5% to 10% for Sales Tax and 6% for Service Tax.

To comply with SST regulations, businesses must first go through the SST registration process. This step is necessary for companies that meet certain thresholds or provide taxable goods or services. Once registered, businesses are required to charge SST on their invoices and remit the collected tax to the government. Not all businesses are required to register for SST, but it’s crucial to understand the criteria to determine if your business needs to go through the SST registration process. Failing to comply with SST regulations can result in penalties, so ensuring proper registration is a must for anyone starting a business in Malaysia.

TL;DR:

SST (Sales and Service Tax) is a key tax system for businesses in Malaysia, replacing GST in 2018. If you’re setting up a company, it’s crucial to understand the rates (5-10% for Sales Tax and 6% for Service Tax) and register for SST if you meet the turnover threshold. Failing to comply with SST regulations can lead to penalties. Follow the registration steps and stay on top of your tax obligations to ensure smooth operations.

 

What is SST?

SST, which stands for “Sales and Service Tax,” is a consumption tax levied on the sale of taxable goods and services in Malaysia. It is a fundamental component of Malaysia’s taxation system and plays a vital role in the country’s fiscal policy. The SST system was reintroduced in Malaysia in 2018, replacing the previous Goods and Services Tax (GST) regime.

 

To gain a deeper understanding of the implications and intricacies of SST, let’s delve into its various facets. This knowledge will be valuable as you prepare to set up a company in Malaysia.

 

The Different Types of Malaysia SST Rates

Malaysia’s SST system consists of two main tax categories: Sales Tax and Service Tax.

1. Sales Tax: Malaysia levies Sales Tax on taxable goods manufactured in the country and imports into Malaysia. The tax rate for Sales Tax varies depending on the category of the goods. Essential items such as basic food items, pharmaceutical products, and agricultural tools are exempt from Sales Tax. However, the standard rate can be as high as 10%.
2. Service Tax: Malaysia imposes a Service Tax on specified services provided within the country, including hotels, restaurants, insurance, and professional services. The standard rate for Service Tax is 6%, but certain services may receive exemptions or different rates.

 

Understanding these tax categories and their respective rates is essential for businesses planning to set up a company in Malaysia. It allows them to accurately determine their tax liabilities and ensure compliance with SST regulations.

 

Did SST replace GST?

The short answer? Yes, the SST system replaced the Goods and Services Tax (GST) back in the year 2018.

 

GST was a broad-based consumption tax that applied to a wide range of goods and services at a standard rate of 6%. The decision to reintroduce SST was made to simplify the tax structure and make it more business-friendly. As a result, businesses operating in Malaysia needed to adapt to the new tax framework. Therefore, it has specific implications for both entrepreneurs and small business owners.

 

Paying SST in Malaysia After Setting up a Company in Malaysia

Businesses in Malaysia, including manufacturers, service providers, and importers of taxable goods, typically pay SST. It’s essential to recognise that SST is a consumption tax, and it ultimately gets transferred to end consumers through increased prices for goods and services.

This dynamic highlights the importance of businesses understanding and managing their SST obligations, as non-compliance can lead to financial and legal consequences.

 

Requirements for Businesses to Comply with SST?

To ensure compliance with SST regulations, businesses in Malaysia, especially those who plan to set up a company in Malaysia, must follow several key steps:

1. Determine Tax Liability: Businesses need to identify whether their goods or services are subject to Sales Tax or Service Tax and calculate the appropriate tax liability. This determination is critical for accurate tax collection and reporting.
2. Registration: Businesses exceeding the threshold for annual sales or service tax turnover must register for SST. Registration can be done online through the Royal Malaysian Customs Department (RMCD) website. Once registered, businesses will obtain a Tax Identification Number (TIN).
3. Tax Collection and Payment: Registered businesses must collect the relevant tax from their customers and remit it to the RMCD within the specified time frame. Effective management of tax collection and payment is crucial to fulfilling tax obligations.
4. Filing and Reporting: Businesses must submit regular tax returns and reports to the RMCD, providing details of their taxable transactions and financial records. These reports help authorities monitor and verify compliance.
5. Record-Keeping: Maintaining accurate records of all transactions and tax-related documents is crucial to demonstrate compliance during tax audits. Businesses should retain records for the prescribed period, making them readily accessible for inspection.

 

Registering for SST: A Step-by-Step Guide for Businesses that Plan to Set up a Company in Malaysia

Registering for SST is a crucial step for businesses that plan to set up a company in Malaysia. Here’s a simplified guide to the registration process:

1. Eligibility: Determine whether your business meets the eligibility criteria for SST registration based on the annual threshold for sales or service tax turnover. These thresholds may change over time, so it’s essential to stay updated on current requirements.
2. Online Registration: Visit the RMCD website and complete the online registration form. You will need to provide information about your business, such as its structure, activities, and financial details.
3. Attach Required Documents: Prepare and attach the necessary documents, including your business registration certificate, identification documents, and bank account details. Documentation requirements can vary, so verifying the latest requirements is crucial.
4. Submission: Submit the completed application through the online portal. After submission, the RMCD will review your application and may request additional information if necessary.
5. Approval: Once your application is processed and approved, you will receive a Tax Identification Number (TIN) and be officially registered for SST. Your TIN is a unique identifier for tax-related activities, so keep it secure and accessible for all tax-related transactions.

 

It’s important to ensure that your business complies with all SST regulations to avoid penalties and legal issues. Non-compliance can result in fines, legal action, and damage to your business’s reputation.

 

Mastering SST Compliance: A Must-Know Before You Set up a Company in Malaysia

In conclusion, understanding the Sales and Service Tax (SST) system in Malaysia is vital for entrepreneurs and small business owners looking to set up a company in Malaysia. SST replaced the Goods and Services Tax (GST) to simplify the tax structure and make it more business-friendly. Businesses in Malaysia must be aware of their tax liabilities, register for SST when required, and comply with all tax-related regulations.

 

By following the steps outlined in this comprehensive guide, you can navigate the world of SST in Malaysia more effectively. Keep in mind that SST plays a significant role in the country’s economy and impacts both businesses and consumers. Staying informed and compliant will help your business thrive in the Malaysian market.

 

Let Us Help You Build

Navigating the complexities of setting up a company in Malaysia. Especially when it comes to understanding and complying with SST can be challenging. That’s where Grof comes in. We specialise in providing expert guidance and support to entrepreneurs and small business owners like you. Whether you need assistance with SST registration, tax planning, or any other aspect of starting and running your business in Malaysia, our team of professionals is here to help.

 

With Grof by your side, you can focus on growing your business while we take care of the regulatory and financial aspects. Your success is our priority, so let us assist you in achieving your business goals in Malaysia.