VAT in Malaysia

Updated on Thursday 21st December 2017

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VAT in Malaysia, known as GST (Goods and Services Tax), was introduced in this country on April 1st, 2015, replacing the former sales tax and service tax. In Malaysia, the standard rate for VAT is 6%. Any business with a yearly turnover in excess of MYR 500,000 (around USD 122,500) is required to register for VAT in this country.

What is VAT/GST in Malaysia?

The Malaysian VAT/GST system is largely modeled on the UK VAT. Primarily, the VAT/GST is a consumption tax on goods and services. The main concept of VAT in Malaysia is that only the value added to goods or services is going to be taxed. The VAT system is projected to make sure that the VAT price is ultimately paid by the final consumer and that it is not an additional burden for companies in the value chain.

We invite you to watch the following video on VAT in Malaysia:


Important issues regarding VAT in Malaysia

The type of supplies which are liable to the standard VAT rate in Malaysia are local supplies of goods and services which are not rated at a zero VAT taxation, exempt or granted relief, as well as imported goods and services. Our lawyers in Malaysia can offer more information on this subject. 

There are no reductions for GST in Malaysia, however, certain goods and services are rated with a zero percentage. These are:

•    exports of goods and services;
•    primary foods;
•    resourcing of the initial 300 units of electricity to local users for at least 28 days per billing cycle;
•    resourcing of water to local consumers.

There are certain exemptions to VAT in Malaysia. These exemptions are:

•    financial services;
•    sale and lease of residential real estate, also applied to land;
•    toll highway;
•    private education and healthcare;
•    local public transport;
•    land for agricultural purposes and land for burial, playground or religious building purposes.

In Malaysia, there are certain items that a registered business set up in this country is not able to recover VAT on. These items are:

•    supply or import of passenger vehicles;
•    hiring passenger vehicles;
•    repairs, maintenance and renovation costs in connection with a passenger vehicle;
•    club subscription fee;
•    medical and personal accident insurance premium;
•    medical expenses;
•    family benefits;
•    entertainment expenses, with the exception of current customers or employees entertainment ones;
•    costs connected to effectuating exempt supplies.

For further details, we invite you to get in touch with our Malaysian lawyers.


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