Indirect Tax alert Updated Guide on Professional Services as at 21 September 2021 and the postponement of effective dates for the imposition of Tourism Tax on accommodation premises booked via a digital platform service provider (DPSP)

Indirect Tax alert Updated Guide on Professional Services as at 21 September 2021 and the postponement of effective dates for the imposition of Tourism Tax on accommodation premises booked via a digital platform service provider (DPSP)

EY has outlined below the key highlights of the following Indirect Tax updates:

  • Updated Guide on Professional Services as at 21 September 2021

The Royal Malaysian Customs Department (RMCD) recently issued a revised Guide on Professional Services as at 21 September 2021, which provides amendments and further clarifications pertaining to the Service Tax treatment on services provided by company directors.

The salient points of the amended Guide are as follows:

►    As you are aware, the provision of services by Directors falls within the scope of consultancy services. This is when a person is appointed as a non-executive director on his personal capacity under contract for service to provide expert opinion.

►    However, to the extent that the person is appointed as a Director in the capacity of his/her position or under employment with the company (i.e. contract of service), this is not subject to Service Tax.

►    In view of the above, RMCD has provided further clarification with regard to the Service Tax treatment on office holders’ or directors’ fees, as summarized in the table below:

No. Type of payment Service Tax treatment
1 Directors’ remuneration or fees Subject to Service Tax

 
2 Directors’ allowances (e.g. meeting and monthly allowances, Senior Independent Director (SID) allowances and other allowances, etc.)

 

 Subject to Service Tax
3 Benefit-in-kind (BIK)

  • BIK (e.g. allowance in terms of cash) is a part of the remuneration package and is a perquisite which serves as an additional incentive for directors.
  • BIK is paid directly by the company to the service providers for the non-executive directors to enjoy.

 

  

Subject to Service Tax

 

 

 

 

 

Not subject to Service Tax
4 Reimbursement

 

 Subject to Service Tax
5 Disbursement

 

 Not subject to Service Tax

In this regard, we recommend companies to revisit the current business and/or contractual arrangements with your company directors to ensure accuracy and compliance with the Service Tax legislation

  • Postponement of effective dates for the imposition of Tourism Tax on accommodation premises booked via a DPSP

Under Budget 2021 on 6 November 2020, it was proposed that a tourism tax be imposed on accommodation premises booked via a DPSP starting 1 July 2021.

However, on 17 March 2021, the Prime Minister announced that the tourism tax exemption would be extended until 31 December 2021 under the Strategic Programme to Empower the People and Economy (PEMERKASA). In turn, this has led to the postponement of the implementation of a tourism tax on accommodation premises booked via a DPSP.

On 1 October 2021, the RMCD announced that the Ministry of Finance (MOF) has agreed to postpone the following effective dates for DPSPs:

►    the registration date for tourism tax from 1 October 2021 to 1 October 2022; and

►    the imposition of a tourism tax on accommodation premises booked through a DPSP from 1 January 2022 to 1 January 2023.

The full and complete version of the above-mentioned Guide and Announcement issued by the RMCD can be found in the MyTTx Portal and MySST Portal.