7 Must Knows About SST Payments For an F&B Company in Malaysia
If you are reading this, chances are, you belong to one of the following:
a. You are an aspiring food & beverage (F&B) entrepreneur.
b. You are a business owner who wishes to open and run a small F&B outlet that compliments your existing F&B company in Malaysia
c. You are growing your existing F&B company to greater heights and thus, are considering issues on SST payments.
Here are 7 things to know about SST payments if you own or have a plan to start an F&B company in Malaysia.
If you want to know the impact of the transition from GST to SST in Malaysia we have covered it in a previous article: GST to SST in Malaysia, 3 Important Key Impacts explained +InfoGraphic.
1. What kind of F&B company do you operate in Malaysia?
For a start, it is important to understand that not everybody who sells food and drinks in Malaysia is viewed as a F&B company operator in Malaysia by the RMCD. Here, I’ll provide a list to make a distinction between a F&B company operator and one that is not which are exempted from service tax registration by the RMCD. They are as follows:
| F&B business Operators (Required to Register SST by RMCD) | Other F&B Enterprises (Exempted from SST Registration by RMCD) |
|---|---|
| -Restaurants -Bars -Snack-Bars -Canteens -Coffee Houses -Food Courts -Catering. Service Providers | -Canteen in Educational Institutions -Canteen in Religious Institutions/Bodies -Kiosk -Counters -Sales Booths -Night Markets or Pasar Tani |
2. What is Taxable under Service Tax Act (STA) 2018?
In addition to F&B sales, it is important to take note that there are certain sales received in the course of running a F&B company which are taxable under the STA 2018. The service tax rate is fixed at 6% of their sales prices. To name a few, they include:
| Sales (Subjected to STA 2018) | Sales (Not Subjected to STA 2018) |
|---|---|
| – Parking Fees at F&B Premises – Valet Services – Rental of Facilities of F&B company – Provision of Entertainment Services – Provision of Cooking Services – Provision of Corkage Services – Sale of Bottled, Packed or Canned Drinks | – Rental of Spaces at a F&B company’s Premises – Sale of Tobacco Products – Sale of Ancillary Merchandises – Sale of Mineral Water or Drinking Water – Service Charges |
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3. Who should Register as a Service Tax Payer?
If you are an F&B company operator in Malaysia recognised by the RMCD, you are required to register your F&B company in Malaysia as a service taxpayer under STA 2018 if it has exceeded or will be exceeding RM 1.5 million in turnover over 12 months. Based on the STA 2018, the calculation of the RM 1.5 million thresholds is:
a. Inclusive of the total market value of all sales that are subjected to STA 2018 only.
b. The 12-month period can be in reference of the following two methods as described below:
| Historical Method | Future Method |
|---|---|
| Current Month + Its Previous 11 Months | Current Month + its Future 11 Months |
| Example: Current Month – August 201912-Month Period: September 2018 – August 2019 | Example: Current Month – August 201912-Month Period: August 2019 – July 2019 |
If your F&B company had or will be exceeding the RM 1.5 million threshold, you are required to register it as an SST payer by the last day of the following month at the following website link – MySST: Application for Service Tax.
4. What is the Most Important Document for SST payments?
Answer: Your Invoice.
It must contain the following information:
a. The word ‘Invoice’ on your invoice.
b. Name, Address, and Service Tax Registration Number of Your Business.
c. Invoice’s Serial Number.
d. Date of Transaction.
e. Description of Taxable Services Provided and Their Prices.
f. Any Discounts Offered.
g. The Total Payable Amount of Taxable Services Provided.
h. The Service Tax Rate and Service Tax Chargeable as a Separate Amount.
i. The Total Amount Payable inclusive of Service Tax Chargeable.
Here is a sample of an invoice:
Are you planning to change your small business to Sdn Bhd? We have written Pros & Cons for Changing Your Small Business to a Private Limited Company (Sdn Bhd). If you’re thinking of changing your F&B enterprise to an Sdn Bhd, it is a good read for you.
5. How Frequent Should You Make SST Payments to the RMCD?
The taxable period is two calendar months starting from 1 September 2018. As such, its first taxable period is from 1 September 2018 to 31 October 2018 with the subsequent taxable periods are as follows:
a. 1 November 2018 to 31 December 2018.
b. 1 January 2019 to 28 February 2019.
c. 1 March 2019 to 30 April 2019 … and so on.
Upon completion of a taxable period, a registered service tax payer is obligated to submit its service tax returns and make its full SST payments prior to the final day of the month following the end of the taxable period. Thus, from the above taxable periods, their final day of tax submissions and payments are as follows:
| Taxable Periods | Final Date of Tax Submission & Payments |
|---|---|
| 1 November 2018 to 31 December 2018 | 31 January 2019 |
| 1 January 2019 to 28 February 2019 | 31 March 2019 |
| 1 March 2019 to 30 April 2019 | 31 May 2019 |
6. What if You Received a Portion of the Amount Billed to Your Customers?
Let us assume that you have a restaurant.
On 1 May 2019, you’d accepted a request from a company to organise a special full-day event which was to be held on 5 June 2019 for a price of RM 15,000. At the same date, you collected a down payment amounting to 50% of its price.
The event was successfully held. On 6 June 2019, you’d issued the company the invoice to collect the remaining 50% of the agreed amount. The company made its payment on 10 July 2019.
The question is, ‘How much and when should you pay for its service tax?’
Its answers are as follows:
a. The service tax payable for the entire sum of this agreement is RM 900. (RM 15,000 x Service Tax @ 6%)
b. Service tax is payable when you received payments from customers. In this case, the payment was received in two separate taxable periods as shown below:
| Taxable Periods | Payment Collected & Date | Service Tax Payable | Due Date |
|---|---|---|---|
| 1 May 2019 to 30 June 2019 | RM 7 500 (1 May 2019) | RM 450 (RM 7,500/RM 15,000 x 100%) | 1 July 2019 |
| 1 July 2019 to 31 August 2019 | RM 7 500 (10 July 2019) | RM 450 (RM 7,500/RM 15,000 x 100%) | 30 September 2019 |
c. Hence, the due dates for their SST payments would be different.
7.What are the Penalties for Late Payment of Service Tax?
In the event of a late payment of service tax, the RMCD imposes a penalty that amounts to:
| Duration of Late Payment | Penalty Rate (%) |
|---|---|
| First 30 Days | 10% |
| Next 30 Days | 15% |
| Next 30 Days | 15% |
The RMCD would then prosecute any SST payer if he fails to settle his payments of any outstanding service tax amounts after 90 days.
Here, I’ll illustrate the calculation of its penalty with an example.
Let us assume that your service tax payable is RM 10,000 for the taxable period between 1 July 2019 to 31 August 2019. You had settled the SST payments on these following dates:
| Service Tax Payments | Payment Date |
|---|---|
| RM 3 000 | 15 September 2019 |
| RM 3 000 | 15 October 2019 |
| RM 2 000 | 15 November 2019 |
| RM 2 000 | 15 December 2019 |
How much penalties would you incur?
First, the due date to make your SST payments is on 30 September 2019. Thus, the calculation of your penalty is as follows:
| SST Payments | Payment Date | Penalty Incurred | Penalty Amount (RM) |
|---|---|---|---|
| RM 3 000 | 15 September 2019 | No | No Penalty Incurred |
| RM 3 000 | 15 October 2019 | Yes | RM 700 (RM 10,000 – RM 3,000) x 10% |
| RM 2 000 | 15 November 2019 | Yes | RM 600 (RM 10,000 – RM 6,000) x 15% |
| RM 2 000 | 15 December 2019 | Yes | RM 300 (RM 10,000 – RM 8,000) x 15% |
In total, your total penalties payable is RM 1,600.
(RM 700 + RM 600 + RM 300)
As such, it is advisable to settle your SST payments within its due date.
Read also: The 4 Laws to Get Your Small Business Accounting Right From the Start.
Conclusion:
I hope the best has served you well as a guide to service tax planning especially if you are an F&B company operator. However, if your situation is more complex, then, it is helpful to seek the assistance of a tax advisor.
If so, you may use Joolah.my, a free search tool which connects you to the best accounting and legal services providers in Malaysia in a matter of minutes.
