Provision of Taxable Service Outside the Group or Outside Malaysia Renders all such Services within Group No Longer Exempted in Intra-Group Service Tax Regulations

Service tax exemption is given under Schedule 1, Service Tax Regulations 2018 when a component company within a group which has a status of ‘being controlled’ provides taxable services to other companies within the group. However paragraph 8 of the First Schedule of the Regulations states :

8.   Where a company provides any services mentioned in paragraph (3) to another person outside the group of companies, the same service provided to any company outside or within the group of companies shall be a taxable service

It is therefore critical to ensure the component company that provides such taxable services confines such services only to businesses in Intra-group.

What happens if such services are provided to a person outside the country. In normal situation when such services are taxable services in the country, provision of such services outside the country are non-taxable having a status of ‘Exported services’ (although such a term does not exist in the Service Tax Act 2018). Provision of a taxable service by a component company in the Intra-group to a person outside the country would jeopardise the exemption because:

i.                     Service tax Act in the Schedule states specifically when such services to a person outside the country in connection with land or other matter outside Malaysia is exempted for such particular service.

ii.                   The type of services that are exempted in Intra-Group specified in item (a), (b), (c), (d), (e), (f), (g), (h) or (i) in column (2) in Group G

iii.         In column 2 of Schedule a clause provides specific instances provision of such services qualifies for exemption eg. (h) Provision of all types of information technology services, excluding provision or sale of goods in connection with the provision of the information          technology services.

(i) Provision of all types of management services including project management or project coordination, excluding provision of such services in connection with—

(i) goods or land situated outside Malaysia; or

(ii) other than matters relating to matters specified in (i) outside Malaysia.

(j) Provision of all types of employment services, excluding—

(i) provision of employment services in the form of secondment of employees or supplying employees to work for another person for a period of time;

(ii) provision of employment services for employment outside Malaysia.

      (k) Provision of guards or protection for the personal safety or security of another person or    

                  for the safety or security of the property or business of such other person, excluding

                         provision of such services to guard or protect a person, or a property or business

                         situated, outside Malaysia.

Example of Case Addressed

Such a case was addressed in an enquiry by a Tax Consultant: This was a matter under Service Tax Act 1975. However the Regulations in Schedule 2 as stated have been completely replicated in Schedule 1 of the Service Tax Regulations 2018. 

1

         WE Tax Consultants ingin tahu jika perkhidmatan pengurusan yang dibekalkan oleh syarikat yang  menawarkan perkhidmatan sama secara intra-group kepada Associate company di luar Malaysia (yang tidak dikawal olehnya)  berkaitan dengan tanah atau barangan di luar Malaysia akan mengancam (jeopardise) statusnya sebagai tidak lagi layak dikecualikan cukai perkhidmatan

  

    Perhatian perlu ditarik kepada perenggan 8 dalam Jadual Kedua, Peraturan-peraturan Cukai Perkhidmatan 1975 yang menyebut:

            8.   Where a company provides any services mentioned in paragraph (3) to another person  

           outside the group of companies, the same service provided to any company outside or within 

           the group of companies shall be a taxable service

.  

        Persoalannya adalah samada perkhidmatan oleh syarikat yang memberi perkhidmatan kepada ‘intra-group‘ yang sekarang memberi perkhidmatan sama kepada syarikat lain yang terletak di luar negara berkaitan barangan atau tanah atau perkara lain diluar Malaysia adalah dianggap bercukai dan dikecualikan atau adalah perkhidmatan tidak bercukai (luar skop).

4       

      WE berpendapat perkhidmatan pengurusan kepada Associate di luar Malaysia berkaitan barangan atau tanah atau perkara lain di luar Malaysia akan menyebabkan statusnya terancam(nullify the intra-group service tax exemption).  Saya  memahami rumusannya adalah kerana di perenggan (8) Jadual Kedua tidak dinyatakan pengecualian(excluding…).

5     Pada pendapat saya penawaran perkhidmatan pengurusan yang dibekalkan kepada intra-group kepada syarikat luar(Associate yang tidak dikawalnya) walaupun Associate terletak di luar Malaysia dan berkaitan tanah/barangan/perkara di luar Malaysia adalah membatalkan statusnya sebagai tidak bercukai. Ini kerana :

                        i.            Tidak dimasukkan di perenggan (3) klausa ‘excluding to companies not-controlled’ or associated situated outside Malaysia’ , … shall not be a taxable service

                         ii.           Klausa di kolum Taxable service pada item r. ‘excluding the provision of such services supplied in connection with goods or land situated outside Malaysia dsbnya’ menjelaskan bahwa ianya dikecualikan tetapi perkhidmatan adalah perkhidmatan bercukai bukan tidak bercukai

                  iii.        Juga tiada dicatat dengan nyata bahwa syarat-syarat yang ditetapkan (i) di atas dalam perenggan (6) dan (7) Jadual Kedua.

     Pandangan WE dipersetujui.

      Dis 2012