how does gst affect real estate agents in malaysia

Difference between GST and Sales and

Service Tax(SST)

SST GST

Service tax is a consumptiontax levied and charged on anytaxable services provided byany taxable person

Rate = 6% for service tax

Sales tax is a single stage taximposed on taxable goodsmanufactured locally and/orimported

Is a consumption tax leviedon any taxable goods andservices provided by anytaxable person

Rate = 6% for standard rateitem

GST is a multistage ie frommanufacturer to consumer


Service Tax(SST)

SST GST

Rate of tax = 5% to 10% for sales tax

Threshold varies from RM0 toRM3million for Service taxand RM100,000 for Sales tax

Single stage

Rate of tax = 3 types

i) Zero rated (0%)

ii) Exempted

iii) Standard rated (6%)

Threshold is RM500,000

Multistage


Service Tax(SST)SST GST

Service tax is due when paymentis received for taxable servicesrendered

If payment is not received within12 calendar months from thedate of issuance of invoice, thetax is due on the dayimmediately after the expiry ofthe 12 months period.

Is due on accrual basis and ispayable to the Custom at the endof the following month after theend of the taxable period.



Taxable period = Two calendarmonths

Can claim bad debts relief ifdebtors failed to pay after oneyear only for service tax

Taxable period :-

i) Monthly= For Turnover exceeding RM5million

ii) Quarterly= For Turnover less than RM5million

Can claim bad debts relief ifdebtors failed to pay after 6months



Cannot claim input tax as this issingle stage system

Cannot claim refund

Only apply to limitedprofessional services andindustries

Can claim input tax if goodssupplied is Zero rated orStandard rated

Can claim refund if input tax ismore than output tax

Apply to any goods and serviceswhere the threshold is met

Impact on Real Estate Agents

Estate Agent

a person licensed under Part VA of the Valuers, Appraisers and Estate Agent Act 1981

an Authority of Practice has been issued by the Board of Valuers, Appraisers & Estate Agents under Section 16 of such Act

provides services as he acts as a go-between for the owner and the buyer

assisting with their negotiations to reach an agreed sales price for the property

continue to follow up with the owner until the property is legally transferred to the new owner

Such services = taxable supplies regardless whether the property are commercial or non-commercial


Estate agents, negotiators or brokers

receives a payment known as a Commission from the owner

Have to charge GST on the fee or commission in relation to a property located in Malaysia

If property is located outside Malaysia = zero rated


Disbursements does not constitute a supply and is not subject to GST

provided the following circumstances are met:-made by the person as an agent on behalf of the client

client actually received the goods & services

client is the person responsible to pay

payment is authorised by the client

client knew that the goods & services paid for is provided by third party

payment is itemised

the person claims the exact amount from the client

payment is clearly additional to the supplies the person makes to the client


Reimbursementsrefer to the recovery of an expense that you incur

as a principal from another party

may be subjected to GST if it is a consideration for a supply of goods or services

Eg. telephone, telex, postage, advertising, stationery ,travelling and accommodation

GST registered valuer, appraisers of an estate agents are entitled to claim input tax incurred for the reimbursement


Tax InvoiceSection 33 of the Goods and Services Act 2014

every registered person who make any taxable supply of goods & services

in the course of furtherance of business

in Malaysia

to issue a tax invoice within 21 days from the time of supply


Example:

For real estate agent, where sale of property requires

consent from the State Government, the time of supplystarts when the consent is given.

Tax invoice is issued only within 21 days from the dateof consent.

Impact on Negotiators

• Negotiators

To register & charge GST if:

Income > RM500,000

Is on contract for services


• What constitute taxable turnover?

All fees

Additional fee incurred by valuer ,appraisers/estate agents (excluding disbursements)

Deemed supplies

Eg. private use of business assets and disposal of business gifts, excluding disposal of capital assets

Private use means any amount exceeding RM500


• However, Real estate agent involved in business and selling properties or renting out their own property, the taxable supplies will include:

Fees

Selling price of commercial properties held as trading stock

Rental received from commercial properties

Transitional Provision

GST is payable on supplies of goods and services made on or after 1 April 2015

If there is a continuous supply of services spanning the GST commencement:

Portion of supply made before 1 April 2015

= not subject to GST

Portion of supply made on/after 1 April 2015

= subject to GST

Transitional ProvisionFor Estate Agent:

must apportion their services and charge accordingly

GST is only chargeable for such services rendered after GST implementation (1 April 2015)

Apportionment can be by way of time spent or transaction of the services

Example:

If the rental of a shop starts from 15 March 2015 to 14 April 2015, only the portion of rental from 1 April to 14 April 2015 is subject to GST.

MARGIN SCHEME (MS)

Why Margin Scheme?

Normal rules, GST is charged on full value of taxable

supplies

Example:

Used car bought from an individual, and then sold to

another person.

To avoid double taxation for taxable persons who

acquire second-hand goods where no tax was

previously charged on the acquisition.

MARGIN SCHEME (MS)

How GST being impose under Normal rules?

Selling price Selling price

RM45,000 No GST RM50,000 *GST 6%=RM3,000

*GST= RM50,000 x 6%= RM3,000.00

Individual Second hand

DealerIndividual

Registered person

Unregistered person

MARGIN SCHEME (MS)

How GST being impose under Margin scheme?

GST will be charged based on the margin

i.e. the difference between selling price and the purchase price of the prescribed second hand goods

If there is a difference (excess), the GST is to be treated inclusive in the consideration

If there is no excess, then there is no GST due and payable

MARGIN SCHEME (MS)

How GST being impose under Margin scheme?

Used goods must be acquired by the MS participants where no GST chargeable on the acquisitions

Selling price Selling price

RM45,000 No GST RM50,000 *GST 6%=RM283.01

*Margin=RM5,000.00 (RM50,000 – RM45,000)

GST=RM5,000 x 6/106 = RM283.01


DealerIndividual

Registered person

Unregistered person

MARGIN SCHEME (MS) How GST being impose under Margin scheme?

GST on Margin can also be imposed by approved person under MS to the other MS participants

Selling price Selling price Selling price

RM45,000 No GST RM50,000 *GST 6%=RM283.01 RM55,000 *GST 6%=RM283.01

*GST 6%=RM283.01


Dealer (MS)IndividualSecond hand

Dealer (MS)

Individual

MARGIN SCHEME (MS) Section 60 - Relief for Second Hand Goods

Selling Price RM50,000 (inclusive of GST)

Cost Price RM45,000

Gross Margin RM5,000 [RM50,000 – RM45,000]

GST RM283.01 [RM5,000 x 6/106] (not to be shown on invoice)

Value of the

car

RM49,716.99 [RM50,000 – RM283.01] (Selling price less GST)

Output tax RM283.01

Input tax RM0.00 (no input tax claimable as no tax invoice is issued by the

seller)

Net GST RM283.01

MARGIN SCHEME (MS)

Goods eligible for the relief are as follows:

used motor vehicle after the implementation of GST and include used motor vehicle which is subject to sales tax whether on locally manufactured vehicle or importation

Taxable supply of land and property (Commercial and Industrial) acquired after the implementation of GST

MARGIN SCHEME (MS)

Who is eligible for the scheme?

Any registered person who is involved in the business buying and selling of second-hand motor vehicles or real properties

Eg. Second hand car dealers and Real estate agents

MARGIN SCHEME (MS) How Margin Scheme Operates?

Sales transaction to MS registrant

Seller Buyer

Individual

Non-registrant MS registrant

MS registrant

GST registrant

Scenario 1

A buyer who is GST MS registrant can purchase eligible goods from individual, non-registrant, GST MS registrant or GST registrant.

No tax invoice is issued by the seller (i.e.GST is not chargeable on the sale). No input tax to be claimed by the buyer.

The buyer will then have the choice whether he wants to apply the margin scheme or not when he sells the goods.

MARGIN SCHEME (MS)

Requirement under the Margin Scheme:

Taxable person needs to apply for this scheme using the special form

Approval under this scheme is not subject to renewal

The goods is allowed to be transacted under margin scheme with acquisition made from:-

Individual

Non-registrant

Registrant as regard to goods which fall under the block input tax

Registrant person approved under the Margin Scheme (MS)

MARGIN SCHEME (MS)

Requirement under the Margin Scheme:

No tax invoice to be issued under this scheme and it is

an offence under Sec.33(8)

If the buyer is a registered person, he is not entitled to

claim the input tax incurred on the acquisition

Approved person has an option whether to impose GST

based on margin or according to the normal rules but

needs to issue tax invoice on the supply

MARGIN SCHEME (MS)

Sales transaction by MS registrant

Seller Buyer

GST MS registrant individual

non-registrant

GST MS registrant

GST registrant

Scenario 2:

The seller can opt whether he wants to apply the marginscheme or not when he sells the goods. If the seller sells thegoods using margin scheme, he will issue a normal invoiceand account for output tax based on the margin.

We are an Approved Auditors under Companies Act 1965

established in 1996 and Licensed Tax Agent under Section 153(3)

of the Income Tax Act 1967 and GST Tax Agent under Section 170

of Goods and Service Tax Act 2014.

Services provided:-

Auditing

Income Tax compliance

Income Tax planning

Accounting

Company secretarial

GST application

GST returns

GST planning & advisory

GST training

C-6-5 Megan Avenue 1,

189 Jalan Tun Razak

50400 Kuala Lumpur

Tel : 03-21660198 / Fax : 03-21662198

Email : [email protected]

Should you have any enquiries, please do not

hesitate to contact us

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