The Royal Malaysian Customs Department published the Guidelines on Brokerage and Underwriting Services on 26 February 2024.
The guidelines provide an overview of the service tax treatment on brokerage and underwriting services under the Service Tax Act 2018.
Key Points:
Effective 26 February 2024, the scope of taxable services is expanded to include brokerage or underwriting services relating to ships/aircraft, commodities, real estate or any other brokerage and underwriting services.
Brokerage services include facilitating transactions between buyers and sellers and providing market information in return for brokerage fees/commissions.
Underwriting involves evaluating risks and agreeing to take on financial risks in return for a fee.
Brokerage/underwriting fees or commissions charged are subject to service tax.
The guidelines outline the service tax requirements for those providing brokerage and underwriting services.
FAQs
Q: What is the threshold for registration of brokerage and underwriting services? A: The threshold value is RM500,000.
Q: What is the tax rate for brokerage or underwriting services?
A: The tax rate for brokerage or underwriting services before 1 March 2024 is 6%. Effective 1 March 2024, the tax rate is increased to 8% for all brokerage and underwriting services.
Q: What is the service tax treatment if brokerage services are provided by a Langkawi-based service provider to a recipient in Alor Setar, Kedah? A: The brokerage services provided are taxable services subject to service tax. Refer to section 49 of the Service Tax Act 2018.
Q: What is the difference between an insurance broker and an insurance agent? A: An insurance broker represents the insurance companies and can obtain insurance quotations from any insurance company. An approved insurance broker must have a license from Bank Negara Malaysia. Meanwhile, an insurance agent represents the customer and can only obtain a maximum of two quotations from insurance companies they are registered with.
Service providers must register, charge service tax appropriately, issue tax invoices, submit tax returns and maintain proper records. Further information is available from the Royal Malaysian Customs Department. Reference:
