PETALING JAYA: Basic banking and financial services related to current and savings accounts, and other similar services such as e-wallet, will be exempted under the scope of the expanded service tax which will take effect on July 1.
Basic transactions at the counter or using an automated teller machine (ATM) are exempted from the service fee, according to the Customs Department Sales and Service Tax Division’s guide on Financial Services.
Other basic banking services include deposit, withdrawal, payment or fund transfer as well as printing of account statements.
For instance, the RM1 ATM withdrawal fee for money taken out of a savings account is not subjected to service tax because it falls under the basic banking service.
Similarly, bill payments done through online banking or transfer between two e-wallet accounts are not subjected to service tax.
Processing fees for managing investment deposits however would be subjected to the tax.
Aside from basic banking services, financial services and charges excluded from service tax, include interest or profit charged under conventional or Islamic financial services, punitive charges such as late payment fees and dishonored cheque fees, financial services related to goods, land or matters outside Malaysia as well as brokerage or underwriting services for individual medical or life insurance.
Buy Now, Pay Later providers must register for service tax if its total administrative fees exceed RM500,000 per year.
If no administrative fees are charged, it will not be required to register for service tax.
Taxable services include credit facilities, insurance, payment systems, investment advice, fund management, factoring and financial leasing, are among the services subjected to service tax.
The annual fee of a credit card facility is not subject to service tax.
“For the provision of credit line facility or shariah compliance financing services through the activation of a primary credit card, primary charge card, supplementary credit card or supplementary charge card, the rate of tax is RM25 for each card, on the date the card is activated and every twelve months thereafter or part thereof after the card is activated,” it said.
For home loans where a setup fee and interest on the loan are charged, the setup fee will be subject to service tax while the interest will not be subject.
Meanwhile, banking associations have reassured that the upcoming expansion of the service tax scope, effective July 1, will not affect basic banking services commonly used by the public.
“Basic banking services that involve fees or commissions such as those related to current accounts (cheque accounts), savings accounts or similar accounts, including e-wallets are not subject to service tax,” the Association of Banks in Malaysia, the Association of Islamic Banking and Financial Institutions Malaysia and the Malaysian Investment Banking Association said.
These services include fees imposed on cash deposits, withdrawals, payments, or local fund transfers; issuance of debit cards and subsequent annual fees; basic transactions done at bank branches or ATMs such as bill payments, printing of current or savings account statements.
“These are considered essential banking services and remain out of scope for service tax purposes. In addition, annual fee imposed on creditor charge card will also be excluded.”
Interest or profit and penalties or other punitive charges will not be subject to service tax. The above exclusions are intended to ensure that day-to-day banking activities for individual consumers remain unaffected by the service tax expansion,” they said.
