KUALA LUMPUR, February 29 – Malaysia’s Ministry of Finance (MOF) has unveiled details of tax reform initiatives aimed at bolstering the country’s fiscal foundation and advancing its economic trajectory under the MADANI framework. Key among these reforms is the increase in the Service Tax rate from 6% to 8%, effective March 1, 2024, focusing primarily on discretionary and business-to-business activities to ensure that citizens are not burdened with higher consumption taxes, particularly on essential services like food and beverage, parking, telecommunications, and logistics.
According to YB Senator Datuk Seri Amir Hamzah Azizan, Minister of Finance II, the government has taken a cautious approach to reforming the country’s taxation system to support economic transformation while safeguarding citizens from undue burdens. The enhanced taxation system is expected to generate an estimated additional revenue of RM3 billion, which will be utilized to improve targeted assistance to citizens and enhance critical public infrastructure such as healthcare, education, and roads.
The revised regulations under the Service Tax (Amendment) 2024, effective February 23, 2024, will apply an 8% tax rate to all taxable services listed in the First Schedule of the Service Tax Regulations 2018, including imported services and digital services. Additionally, service coverage will be expanded to ensure uniform taxation across specific services within the same industry, promoting fair treatment and consistency. Despite the increase in the Service Tax rate from 6% to 8%, it will not affect essential services that are part of the citizens’ lifestyle, ensuring a gradual adjustment without causing sudden price hikes or economic disruptions.
