FAQs

Frequently Asked Questions (“FAQ”) for Sales and Service Tax

What are Sales Tax and Service Tax?

Sales Tax and Service Tax were implemented by the Government of Malaysia to replace the Goods and Services Tax (“GST”) effective 1 September 2018.

How do I know if the Sales Tax or Service Tax is charged by an authorised person or a person registered for Sales Tax or Service Tax?

A person registered to charge Sales Tax for taxable goods or Service Tax for taxable service provided must issue an invoice with the prescribed particulars.

Is Tokio Marine Insurans (Malaysia) Berhad charging Sales Tax and/or Service Tax on its product(s)?

TMIM is a taxable entity person providing general insurance, which is a taxable service defined under the Service Tax Act 2018 and other applicable acts, regulations, and orders (“Laws”). Hence, the Company is obligated to charge and collect Service Tax on insurance premiums from its policyholders, except for insurance policies that are specifically exempted under the Laws.

Since TMIM is not a manufacturer of goods, Sales Tax is not applicable to TMIM.

My insurance agent informed me that he is not registered for Service Tax, why is he still charging Service Tax on my insurance policy?

Insurance agency service is not a taxable service, as such, insurance agents are not required to register and charge Service Tax for their services. Instead, Service Tax on premiums is charged by the insurance company which the insurance agent represents, with the agent collecting the tax on behalf of the insurance company.

What is the rate of Service Tax on insurance premium?

Service Tax is currently levied at 6% of the insurance premium.

What types of insurance policies are subject to Service Tax? And what are the exemptions?

All general insurance policies are subject to Service Tax except for the following policies:

Medical insurance on an individual.
Insurance to cover risks outside Malaysia. This includes the insuring of risks relating to the transportation of passengers or goods:
1. From a place outside Malaysia to another place outside Malaysia.;
2. From the last exit point in Malaysia to any place in another country.; or
3. From a place outside Malaysia to the first entry point in Malaysia.
Where the service of insurance coverage is from a point outside Malaysia to a point inside Malaysia in a single insurance contract which covers both international and domestic movements of goods, the domestic insurance coverage is not subject to Service Tax.
Insurance to cover registered educational institutions and religious organizations.
Insurance to cover any risks incurred in the making of advances or the granting of credit directly relating to the export of goods, services or investments outside Malaysia.

Is there any exemption available for Free Trade Zones?

Service Tax exemption is available for services provided within or between Designated Areas (Labuan, Langkawi and Tioman) and Special Areas (free zone, licensed warehouse, licensed manufacturing warehouse and Joint Development Areas), by any person whose principal place of business is located in the Designated Areas or Special Areas.

TMIM does not have a principal place of business in these areas, hence this exemption is not available to the Company. TMIM will charge and collect Service Tax of 6% for insurance coverage provided to these areas.

My insurance policy was effective before, but expired after, 1 September 2018, will I be charged Service Tax of 6%?

Insurance policies with effective dates before, and that expired on or after, 1 September 2018 (“spanning policies”), are subject to GST of 6%, GST of 0% and/or Service Tax of 6% on proportionate basis depending on the policy effective date.

Your policy may fall under one of the scenarios below:

As the next course of action, TMIM will make adjustments on the relevant taxes to your insurance policy and to collect from you or to refund you, as appropriate, the differential amount.