GST Latest Updates & Developments

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1 GST Latest Updates & Developments 3 rd October 2015 Presented by Simon Chua ITS Management Sdn Bhd ITS Management Sdn Bhd ~ Simon Chua 1

2 Speaker profile Simon Chua, CA(M), FCCA(UK), B.Sc (First Class Hons) in applied accounting, Dip in Commerce (TARC), is a practising chartered accountant and GST tax agent licensed by Ministry of Finance, with more than 12 years of wide and diversified working experience involving in tax advisory, tax compliance and business advisory services. He conducts in-house and public trainings to organizations in relation to tax compliance and goods and services tax. He is a member of Malaysian Institute of Accountants (MIA) and Association of Chartered Certified Accountants (ACCA). Currently, he is ITS program director for GST Training & Implementation unit. ITS Management Sdn Bhd ~ Simon Chua 2

3 Course Content Updates affecting the followings and its practical implications: Supply (incl. disbursement vs. reimbursement) Deemed supply (gift rule) Input tax credits Cross-border supply of goods Cross-border supply of services FOREX rates Bad debts adjustments Other recent developments Q&A ITS Management Sdn Bhd ~ Simon Chua 3

4 Reimbursement & Disbursement ITS Management Sdn Bhd ~ Simon Chua 4

5 Disbursement vs. reimbursement OS OP My Cus Disbursement Reimbursement My Co Tax Invoice to My Cus Tax Invoice to My Co My Supplier SR TX Example Tax invoice Sales RM1,000 GST RM 60 Total RM1,060 ITS Management Sdn Bhd ~ Simon Chua 5

6 Reimbursement Expenses incurred in the course of providing services/goods for a business A supply subject to GST Entitled to an input tax claim Reported in GST return Tax invoice must be issued Can mark up Itemised the details is not required Control the supplier ITS Management Sdn Bhd ~ Simon Chua 6

7 Disbursement Payments made on behalf of related companies/customers are not a supply Not subject to GST Not entitled to an input tax claim Not reported in the GST returns Can not mark up Itemised the details Do not control the supplier ITS Management Sdn Bhd ~ Simon Chua 7

8 Deemed supplies ITS Management Sdn Bhd ~ Simon Chua 8

9 Free gift ITS Management Sdn Bhd ~ Simon Chua 9

10 Free gift rule Goods given free to anyone:- Same person Same year >RM Including employees (Individual name)& customers (Company name) Gift rule is applicable to goods only, services are not included except connected person A registered person has to accounts for GST even the input tax is not claimed (Decision 5/2015 Item 5 ) ITS Management Sdn Bhd ~ Simon Chua 10

11 Free gift rule No deemed output tax:- Zero rated supplies Exempt supplies Blocked input tax Services Sponsor (Decision 1/2015 Item 2 ) Cash/cash voucher Purchase from non-registered person (Decision 2/2014 Item 4) Gifts worth RM500 and below Employee benefit - Included in company policy (ie handbook) ITS Management Sdn Bhd ~ Simon Chua 11

12 Free gift tax year Tax year = financial year (ie, Jan to Dec 2015) 1/1 1/4 1/5 1/8 1/9 31/12 Free gift Feb RM200 Apr RM200 Jun RM200 Nov RM300 No apportionment is required of RM500 for first year DG s Decision 2/2014 Item 4 ITS Management Sdn Bhd ~ Simon Chua 12

13 Free gift ITS Management Sdn Bhd ~ Simon Chua 13

14 Connected persons Accounts for GST follows open market value ITS Management Sdn Bhd ~ Simon Chua 14

15 Disposal with or without consideration to connected person Transfer or disposal can be for a consideration or no consideration Disposal of assets below market value to connected person but accounts for GST must follows open market value Without consideration is treated as a supply of goods and is subject to GST depending on the open market value Example: Disposal of an company assets of RM53,000 (Inclusive of GST) Open market value of that assets is RM106,000 (inclusive of GST) ITS Management Sdn Bhd ~ Simon Chua 15

16 Disposal of goods without consideration My Co carrying on a trading business disposes of its stocks of equipment to its staff for no consideration The disposal of the stocks of equipment is subject to GST ITS Management Sdn Bhd ~ Simon Chua 16

17 Goods for personal use Ah Chua carries on a sole proprietorship business of selling electronic products He took a stand fan for his own uses This transaction involves the transfer (not disposal) of company stock from the sole proprietorship business to the individual owner of the business This is a supply of goods subject to GST, whether or not for a consideration ITS Management Sdn Bhd ~ Simon Chua 17

18 Input tax credit ITS Management Sdn Bhd ~ Simon Chua 18

19 Input tax credit perspective (claimable) Determination of a mixed supplier TX-RE A mixed supplier has To apportion the input tax use For Green and Pink supplies Mixed Supplier TX-N43 100% not claimable De-minimis Rule > RM5,000 OR > 5% TX,TX-E43, TX-CG, IM 100% claimable SR 6% - SR / DS / AJS GST-03 (5a, 5b) (5b) ZR 0% - ZRL / ZRE / RS GST-03 (10) (11) (13) ES 0% - ES43 GST-03 (12) - ES GST-03 (12) OS 0% - OS / GS GST-03 (NIL) Except BL TX-N43 100% claimable De-minimis Rule RM5,000 & 5% ITS Management Sdn Bhd ~ Simon Chua 19

20 Exempt Supply (Income) ES43 (Incidental financial exempt supply) Interest Interest income from staff or intercompany loans Realised exchange gains If Gain > Loss = Gain Loss = ES43 If Loss > Gain = Loss Gain = EP ITS Management Sdn Bhd ~ Simon Chua 20

21 Exempt Supply (Income) ES (Non-incidental exempt supply) Rental of residential property Disposal of residential property Fees charged for transportation services (Bus Kilang) provided to staff by the employer Fees charged to staff for child care centre provided by the employer Free/FOC is not exempt supply income ITS Management Sdn Bhd ~ Simon Chua 21

22 De-minimis rule An average of RM5,000 per month of exempt supplies, and 5% of the total value of all supplies (taxable and exempt supplies). If the value of exempt supplies does not exceed the prescribed value and proportion as stated above, all exempt input tax shall be treated as attributable to taxable supplies. ITS Management Sdn Bhd ~ Simon Chua 22

23 Blocked input tax Passenger car Buy or importation of passenger motorcar or the hiring of motor vehicle Repair, maintenance and refurbishment of motor vehicle Except: Test drive car Cars used for security purposes Cars used in providing technical assistance Serve as an integral part in the running of a business (taxi or car rental) Additional conditions: Motor car is registered in company name(business name or logo printed on the car) Motor car is not let on hire No private use Kept at business premises, used for business trips and must not be taken home overnight ITS Management Sdn Bhd ~ Simon Chua 23

24 Blocked input tax Passenger car Disallowed even fulfilled all the above conditions: Assigned car (Director car) Pooled car Cars used in sales and marketing Demo or display car (DG s Decision 2/2014 Item 1) Rental paid to hire and drive a passenger motor car ITS Management Sdn Bhd ~ Simon Chua 24

25 Blocked input tax Subscription fee, joining fee, membership fee, transfer fee (Recreational or sporting purposes) Staff insurance premiums (Foreign Workers Hospitalization and Surgical Insurance Scheme) Staff medical expenses incurred for the provision of all forms of medical treatment Family benefits including hospitality provided to the wife, husband, child, adopted child or parents of any person employed by the taxable person Business entertainment except existing customer and staff ITS Management Sdn Bhd ~ Simon Chua 25

26 Allowable input tax credit Mobile phone bill not under taxable person name (DG s Decision 2/2014 Item 2 ) Electricity and water bills not under taxable person name until 31/3/2016 (DG s Decision 7/2017 Item 1 ) Conditions: not a GST registered person tenancy agreement Additional clause the input tax on the electricity and water invoices/bills can only be claimed by the tenant. However if the property owner becomes GST registered person, the tenant is not allowed to claim the input tax using such invoices/bills. ITS Management Sdn Bhd ~ Simon Chua 26

27 Allowable input tax credit Lorry registered under another company (rental lorry) Repair, maintenance and refurbishment of motor vehicle (Furtherance of business) Staff claim Mr Simon Chua C/O SCMS Business Advisory Sdn Bhd ITS Management Sdn Bhd ~ Simon Chua 27

28 Supply of goods ITS Management Sdn Bhd ~ Simon Chua 28

29 Customer transfer to goods Goods Comments Tax Code From Location To Location OM DA M OM DA M Customer Bill of landing OS Bill of landing OS K1 supplier is importer SR K1 customer is importer (DG s Decision 04/2015 Item 1) OS K2 supplier is exporter ZRE Local supply SR Invoice to local company & K2-supplier is exporter (DG s decision 04/2015 Item 2) ZRE OM Outside Malaysia DA Designated Areas (Labuan, Langkawi & Tioman M Malaysia ITS Management Sdn Bhd ~ Simon Chua 29

30 Supplier transfer to goods Goods Comments Tax Code From Location To Location OM DA M OM DA M Supplier Bill of landing OP Supplier invoice OP (IMI/ISI) K1 IM K1 with ATS IS OM Outside Malaysia DA Designated Areas (Labuan, Langkawi & Tioman M Malaysia ITS Management Sdn Bhd ~ Simon Chua 30

31 Transfer to goods DG s Decision 04/2015 Item 1 K1- under LB Tax code IM Tax code OS Invoice from OS to LC Tax code OP ITS Management Sdn Bhd ~ Simon Chua 31

32 Transfer to goods DG s decision 04/2015 Item 2 Tax code OS K2 exporter is LM Tax code ZRE ITS Management Sdn Bhd ~ Simon Chua 32

33 Transfer to goods DG s decision 04/2015 Item 3 Tax code SR Tax code ZRE LA is exporter (K2) ITS Management Sdn Bhd ~ Simon Chua 33

34 Transfer to goods DG s decision 04/2015 Item 4 Tax code ZRE K2 under LS s name ITS Management Sdn Bhd ~ Simon Chua 34

35 Supply of Services ITS Management Sdn Bhd ~ Simon Chua 35

36 Supply of services Local and overseas Location of Supplier Services perform Customer Services used/consumed /Beneficially Treatment Tax Code Malaysia Malaysia Malaysia Malaysia SR Malaysia Malaysia Singapore Malaysia SR DA Malaysia Malaysia Malaysia SR Malaysia DA DA DA SR Malaysia Singapore Singapore Singapore ZRE Singapore China China China OS DA DA DA DA OS ITS Management Sdn Bhd ~ Simon Chua 36

37 Exported services that qualified for ZRE Supplier belongs in Malaysia Receiver belongs out of Malaysia Receiver not in Malaysia when the services are performed + not directly benefit Malaysian Not relate to any land situated in Malaysia Not relate to any goods situated in Malaysia ITS Management Sdn Bhd ~ Simon Chua 37

38 Supply of services (Imported services) Location of Supplier Services perform Customer Services are used or consumed Treatment Tax Code China Singapore Malaysia Malaysia RCP / (DS) China Malaysia Malaysia Malaysia RCP / (DS) Foreign supplier Supply of services in Malaysia if the taxable supply of services made in Malaysia exceeded the threshold of RM500,000, then foreign supplier is required to be registered for GST. ITS Management Sdn Bhd ~ Simon Chua 38

39 GST Accounting and GST-03 GST Accounting for Imported services GST 03-Form (Wholly taxable supplier) ITS Management Sdn Bhd ~ Simon Chua 39

40 GST accounting for Imported services Date GL Code Particulars Tax Code DR CR Form May XXXX Purchases / Expenses RCP 30,000 Item 6a XXXX GST Input tax recoverable RCP 1,800 Item 6b XXXX GST Output tax payable RCP 1,800 Item 5a XXXX Bank / Creditor RCP 30,000 Item 5b ITS Management Sdn Bhd ~ Simon Chua 40

41 GST accounting for Imported services Date GL Code Particulars Tax Code DR CR Form May XXXX Purchases / Expenses TX 30,000 Item 6a XXXX GST Input tax recoverable TX 1,800 Item 6b XXXX GST Output tax payable DS 1,800 Item 5a XXXX Bank / Creditor DS 30,000 Item 5b ITS Management Sdn Bhd ~ Simon Chua 41

42 GST accounting for Imported services GST 03-Form (Wholly taxable supplier) No impact of GST payable or claimable 0 ITS Management Sdn Bhd ~ Simon Chua 42

43 Foreign exchange ITS Management Sdn Bhd ~ Simon Chua 43

44 Foreign exchange If value of supply is expressed in foreign currency, it must be converted in RM:- At the selling rate of exchange prevailing in Malaysia at the time when supply takes place, or At the rate of exchange determined by the DG in the case of import of goods ITS Management Sdn Bhd ~ Simon Chua 44

45 Foreign exchange Exchange rates published by Central Banks Any banks registered under central of Malaysia ITS Management Sdn Bhd ~ Simon Chua 45

46 Foreign exchange News agencies ITS Management Sdn Bhd ~ Simon Chua 46

47 Selling rate and TOS available Monthly average prior month Month end average rate Month-end selling rate Opening selling rate Highest rate plus (+) the lowest rate / 2 prior month Hedged exchange rate Any other rate must be approved by DG Used consistently at least one year ITS Management Sdn Bhd ~ Simon Chua 47

48 9/12 also can Must ITS Management Sdn Bhd ~ Simon Chua 48

49 Bad Debt Relief Customer, other customer, accounts receivable, other receivable (Tax invoice and DN with SR, with GST charged (5a and 5b) ITS Management Sdn Bhd ~ Simon Chua 49

50 Bad debt relief receivable (update) Panel Decision 2014 ITEM 3: Claiming bad debt relief If the bad debt relief is not claimed immediately after the expiry of sixth month, then the taxable person has to notify the Director General (DG) within 5 days after the expiry of sixth month on his intention to claim at a later date. (Amended on 23/3/2015) First letter to RMCD 5 th November 2015 for monthly submission; 5 th January 2016 for quarterly submission ~~~~Refer to appendix to sample letter~~~ ITS Management Sdn Bhd ~ Simon Chua 50

51 Bad debt relief receivable Example 1.0 My co issued an tax invoice on April 2015 to My cus RM106,000 inclusive of GST As at 31 October 2015, My co unable to recover the debt from My cus My co is on monthly taxable period My co has taken legal action on the outstanding due by My cus and fulfil the GST Act 2014 s requirement of sufficient efforts ITS Management Sdn Bhd ~ Simon Chua 51

52 Bad debt relief receivable (Monthly submission) April 2015 (Tax Invoice/DN) October 2015 (Claim) February 2016 (Refund) Payment received GST-03 5a 100,000 5b 6,000 GST-03 6a NIL 6b 6,000 GST-03 5a NIL 5b 6,000 GST NIL GST ,000 GST NIL 18 NIL Bad debt relief Example NIL ,000 ITS Management Sdn Bhd ~ Simon Chua 52

53 Bad debt relief Receivable (Quarterly submission) Apr - Jun 2015 (Tax Invoice/DN) Oct to Dec 2015 (Claim) Jan to Mar 2016 (Refund) Payment received GST-03 5a 300,000 5b 18,000 GST-03 6a NIL 6b 18,000 GST-03 5a NIL 5b 18,000 GST NIL GST ,000 GST NIL 18 NIL Bad debt relief Example NIL ,000 ITS Management Sdn Bhd ~ Simon Chua 53

54 Bad debt relief receivable (Monthly submission) 106,000 (Oct 2015) 106,000 (Feb 2016) Item 17 and 18 in GST Return Form 03 is applicable to Receivable only In other word - Tax Invoice issued with SR ITS Management Sdn Bhd ~ Simon Chua 54

55 GST accounting for bad debt relief Receivable claim (monthly) Date GL Code Particulars Tax Code DR CR Form Oct XXXX GST input tax recoverable AJP/DBRC 6,000 6b XXXX GST sales deferred tax 6,000 XXXX GST sales deferred tax clearing AJP-DBRC 106, XXXX GST sales deferred tax clearing 106,000 For tracking purposes only ITS Management Sdn Bhd ~ Simon Chua 55

56 GST accounting for bad debt relief Receivable refund (monthly) Date GL Code Particulars Tax Code DR CR Form Feb XXXX GST sales deferred tax 6,000 XXXX GST output tax payable AJS/DBRR 6,000 5b XXXX GST sales deferred tax clearing 106,000 XXXX GST sales deferred tax clearing AJS-DBRR 106, For tracking purposes only ITS Management Sdn Bhd ~ Simon Chua 56

57 GST accounting bad debt relief Receivable actual bad debt written off Date GL Code Particulars Tax Code DR CR Form Feb XXXX Bad debt written off OP 100,000 XXXX GST sales deferred tax OP 6,000 XXXX Receivable 106,000 ITS Management Sdn Bhd ~ Simon Chua 57

58 Bad Debt Relief Supplier, other supplier, accounts payable, other payable (Tax invoice and DN with TX, with GST charged (6a and 6b) ITS Management Sdn Bhd ~ Simon Chua 58

59 Bad debt relief payable (Monthly submission) April 2015 (Tax Invoice/DN) October 2015 (Refund) February 2016 (Claim) Payment made GST-03 6a 100,000 6b 6,000 GST-03 5a NIL 5b 6,000 GST-03 6a NIL 6b 6,000 GST N/A GST N/A GST N/A 18 N/A 18 N/A 18 N/A ITS Management Sdn Bhd ~ Simon Chua 59

60 Bad debt relief payable (Quarterly submission) Apr-Jun 2015 (Tax Invoice/DN) Oct-Dec 2015 (Refund) Jan-Mar 2016 (Claim) Payment made GST-03 6a 300,000 6b 18,000 GST-03 5a NIL 5b 18,000 GST-03 6a NIL 6b 18,000 GST N/A GST N/A GST N/A 18 N/A 18 N/A 18 N/A ITS Management Sdn Bhd ~ Simon Chua 60

61 Bad debt relief payable (Monthly / quarterly submission) ITS Management Sdn Bhd ~ Simon Chua 61

62 GST accounting for bad debt relief Payable refund (monthly) Date GL Code Particulars Tax Code DR CR Form Oct XXXX GST purchase deferred tax 6,000 XXXX GST output tax payable AJS/DBPC 6,000 5b ITS Management Sdn Bhd ~ Simon Chua 62

63 GST accounting for bad debt relief Payable claim (monthly) Date GL Code Particulars Tax Code DR CR Form Feb XXXX GST input tax payable AJP/DBPR 6,000 6b XXXX GST purchase deferred tax 6,000 ITS Management Sdn Bhd ~ Simon Chua 63

64 GST accounting bad debt relief Payable actual bad debt written off Date GL Code Particulars Tax Code DR CR Form Feb XXXX Payable 106,000 XXXX GST purchase deferred tax OP 6,000 XXXX Unclaimed money (Pay to gov) OP 100,000 ITS Management Sdn Bhd ~ Simon Chua 64

65 Reimbursement & Disbursement GST Accounting ITS Management Sdn Bhd ~ Simon Chua 65

66 GST accounting for disbursement My Supplier tax invoice Date GL Code Particulars Tax Code DR CR Form May XXXX Contra OP 1,060 NIL XXXX My Supplier / payable / Bank 1,060 NIL ITS Management Sdn Bhd ~ Simon Chua 66

67 GST accounting for disbursement Claim back from My Cus Date GL Code Particulars Tax Code DR CR Form Jun XXXX My Cus / receivable / bank 1,060 NIL XXXX Contra OS 1,060 NIL ITS Management Sdn Bhd ~ Simon Chua 67

68 GST accounting for reimbursement My Supplier tax invoice Date GL Code Particulars Tax Code DR CR Form May XXXX Contra / expense account TX 1,000 6a XXXX GST input tax recoverable TX 60 6b XXXX My Supplier / payable / Bank 1,060 ITS Management Sdn Bhd ~ Simon Chua 68

69 GST accounting for reimbursement Claim back from My Cus Date GL Code Particulars Tax Code DR CR Form Jun XXXX My Cus / receivable / bank 1,060 XXXX GST output tax payable SR 60 5a XXXX Contra / expense account SR 1,000 5b More detail suggestion answer refer to appendix ITS Management Sdn Bhd ~ Simon Chua 69

70 Free gift GST Accounting ITS Management Sdn Bhd ~ Simon Chua 70

71 GST accounting free gift 1 st Scenario (account GST separately for OTP) Date GL Code Particulars Tax Code DR CR Form Nov XXXX Free gift expense / GST expense 42 XXXX GST gift clearing account 700 XXXX GST output tax payable DS 42 5a XXXX GST gift clearing account DS 700 5b ITS Management Sdn Bhd ~ Simon Chua 71

72 GST accounting free gift 2nd Scenario (together with input tax) Date GL Code Particulars Tax Code DR CR Form May XXXX Free gift expense TX 800 6a XXXX GST input tax recoverable TX 48 6b XXXX GST output tax payable DS 48 5a XXXX Cash / creditor / payable DS 800 5b ITS Management Sdn Bhd ~ Simon Chua 72

73 Connected persons Accounts for GST follows open market value GST Accounting ITS Management Sdn Bhd ~ Simon Chua 73

74 GST accounting on deemed supply Connected person Issue a tax invoice Date GL Code Particulars Tax Code DR CR Form May XXXX Bank / other receivable 53,000 XXXX GST Output tax payables SR 3,000 5b XXXX Disposal of fixed assets SR 50,000 5a ITS Management Sdn Bhd ~ Simon Chua 74

75 GST accounting on deemed supply Connected person open market value Date GL Code Particulars Tax Code DR CR Form May XXXX XXXX GST expense accounts 3,000 GST Gift clearing account 50,000 XXXX GST Output tax payables DS 3,000 5b XXXX GST Gift clearing account DS 50,000 5a ITS Management Sdn Bhd ~ Simon Chua 75

76 ITS Management Sdn Bhd ~ Simon Chua 76

For Choosing ITS Management Sdn Bhd As Your Training Provider If you have questions or require further assistance later, please email to

77 For Choosing ITS Management Sdn Bhd As Your Training Provider If you have questions or require further assistance later, please to Subject: Attn: Trainer s Name Other inquiries, please to itslc98@gmail.com ITS Management Sdn Bhd ~ Simon Chua 77

Tax benefits for ultra low emission vehicles

k0 Tax benefits for ultra low emission vehicles Ultra low emission vehicles (ULEVs) are usually defined as vehicles that emit less than 75g of carbon dioxide (CO2) for every kilometre travelled. They will