1. Is there GST (or a similar tax) in Malaysia?
Yes, Malaysia has its own Sales and Service Tax (“SST”) regime, which is slightly different from the usual GST/VAT system.
Sales Tax is a single-stage tax charged and levied:
- on taxable goods manufactured in Malaysia by a taxable person and sold by him (including used or disposed off); and
- on taxable goods imported into Malaysia.
The prevailing Sales Tax rate is 10%.
Service Tax of is a tax charged on any provision of taxable services that is provided in Malaysia by a registered person and made in the course or furtherance of any business. The prevailing Service Tax rate is 6%.
Note that the prevailing SST rates are based on existing laws and subject to changes.
2. What fees are subject to SST?
Jade EServices Malaysia Sdn Bhd (“ZALORA Malaysia”), as a Service Tax registered company under Service Tax Act 2018, will impose 6% Service Tax on fees relating to prescribed taxable services. ZALORA Malaysia will issue to Sellers a Tax Invoice. All SST collected by ZALORA Malaysia will be remitted to the Royal Malaysian Customs Department (“RMCD”).
Currently, ZALORA Malaysia charges 6% Service Tax on the following types of fee:
1. Marketplace commission fee;
2. Payment gateway fee;
3. Any ZAP, marketing or advertising fee; and
4. Trender fee.
The above list is subject to changes in existing laws, regulations and clarifications from RMCD.
3. I am not a Malaysian entity, what taxes will I be subject to if I sell into Malaysia?
You will be subject to Service Tax of 6% on prescribed taxable service fees (Question 2).
In addition, Sales Tax will be applicable under the following situations when goods are imported into Malaysia (refer Question 1)
IDS: 10% sales tax on declared value (i.e. final paid price by customer) of imported stock if it is more than RM500
FBZ: 10% sales tax on COGS of imported stocks (applies to all order value)
These will be charged to Seller via Import Fees, as applicable.
Please note that it was announced in Budget 2022 that sales tax will be imposed on low value items (≤RM 500) imported into Malaysia via air courier with effect from 1 Jan 2023. Details on the proposed law have yet to be released by the Malaysian Government. Please refer to Question 9 for more details.
4. I am not a Malaysian entity, why am I being charged Service Tax?
Service Tax applies to all sellers (including non-Malaysian based sellers) selling on ZALORA Malaysia’s platform. Under the law, as long as the services are provided within Malaysia, the services are subject to SST. Zero-rating does not apply even if the services are provided to a non-Malaysian based seller.
5. Can you provide an example of how the fees are calculated?
If the agreed commission rate is 15%, and the price of the product sold is RM 100, commission fee charged to the seller will be 15% x RM 100 x 106% = RM 15.90
6. Will SST be refunded if there is an overcharge or a purchase is cancelled/refunded?
If a credit note is issued for the fees charged, and Service Tax was charged on those fees previously, then Service Tax will be refunded accordingly. However, if the fee is not refundable e.g., payment gateway fee, no credit note will be issued for the fee even in the event of a cancellation/refund situation and correspondingly, no Service Tax will be refunded.
7. When are we liable for Sales Tax?
For IDS: The customer is the Importer of Record and Sales Tax is generally payable upon importation if the product is above RM500.
For FBZ: Sales Tax is suspended when the products are imported into Malaysia as ZALORA Malaysia has a bonded warehouse. Sales Tax will therefore be payable only when the products leave the bonded warehouse, and that generally happens in the case of a local sale. In the case of an export of goods from the warehouse, zero-rating (0%) will apply.
Any charges ZALORA Malaysia incurs on your behalf will be recharged to you via Import Fees.
8. I am a Malaysian seller cross listing my products in overseas markets. What are the taxes that will be levied on me? Must I account for Imported Service Tax?
No, you do not need to account for Imported Service Tax as ZALORA Malaysia is the contracting and billing party for all Malaysian sellers, even if they are selling on overseas platform. The taxes that will be levied on you will be the same as that mentioned in Question 2. In addition, any import duty and taxes incurred by ZALORA Malaysia in the overseas market will be recharged back to you.
9. How will the proposed change in law on Sales Tax on Low Value Goods impact me?
ZALORA Malaysia is awaiting the detailed regulations to determine the impact on us as an online marketplace operator. We will release details on any changes in due course.
Separately, you should consult with your own professional tax advisors to ascertain the impact of the proposed change in law on your business.