The betting and gaming services industry comprises of these activities:
(i) Gambling in casino
Example 1: Roulette, bacarat, and pai kow
(ii) Betting on horse racing
Example 2: Conducted by turf clubs
(iii) Betting on number forecasting
Example 3: Sports Toto
(iv) Lotteries
Example 4: Big Sweep
(v) Gaming machines
Example 5: Operated by clubs and casino such as jackpot and slot machines
(vi) Raffle
Example 6: Conducted by society which approved by Public Asset Management Division, Ministry of Finance
The provision of betting and gaming activity is either:
(i) A sale of ticket that gives the buyer the right to be placed in a draw for a prize e.g. A lottery ticket
(ii) Or the gambling operator accepting bets relating to the outcome of a gaming event such as a race
(iii) Or a game of chance, where a punter may win or lose money depending on the outcome.
Betting and gaming activities can also be conducted through gaming machines whereby the element of chance in the games is provided by means of the machines.
The provision of services involving betting, sweepstakes, lotteries, gaming machines or games of chance is taxable, and is subject to service tax.
Service Tax on Betting and Gaming
The service tax chargeable for gaming activity is based on the following special provisions of betting and gaming services and shall be due and payable at the following times:
(i) in relation to number forecasting, lottery and a game of chance other than through a gaming machine, at the time when the numbers are drawn;
(ii) in relation to games of chance through a gaming machine, at the time when collection is removed from the machine or at the time when transaction is recorded by the machine;
(iii) in relation to sweepstakes, at the time when the race takes place; or
(iv) in relation to casino gaming, on the last day of the taxable period in which the taxable service takes place.
Example 7:
A number forecast operator receives bets from punters for Draw No. 36/2019. The draw date is on 15 April 2019, and the results published on 16 April 2019.
The service tax is due on 15 April 2019, i.e. the day winning numbers are made known to the punters. He will submit the tax due in the bi-monthly return covering 15 April 2019.
Example 8:
A turf club is conducting a race on 15 May 2019.
The service tax is due on 15 May 2019, i.e. the day horse race results are made known on the race day.
Example 9:
A private club operator banks in money on 6 June 2019, one day after he clears his jackpot machines in his club.
The service tax is due on 5 June 2019, i.e. the day he removes collections from the machines.
Example 10:
A casino operator calculates his total collections for the month of May and June 2019.
The service tax is due on 30th June 2019, i.e. the last day of the taxable period to determine whether he is making a net win or net loss. If it is a net win situation, service tax will be due on a positive value and if there is a net loss, service tax due is nil.
Value of Betting and Gaming Services
Subregulation 5(1) Service Tax Regulations 2018 provides that the value of taxable services involving bettings, sweepstakes, lotteries, gaming machines or games of chance is calculated as follows:
B is the total amount of money payable to any person participating successfully in the bettings, sweepstakes, lotteries, gaming machines or games of chance; and
C is the rate of service tax.
The term ‘any tax or duty under any other written law’ in variable ‘A’ above refers to taxes such as gaming tax, casino duty, pool betting duty, betting and sweepstakes duty, and state sales tax (in Sabah and Sarawak).
If the value of the taxable service calculated above is negative, then the value of the taxable service shall be treated as nil. This implies that, the negative value cannot be deducted against the value of betting and gaming services of the next particular betting and gaming event as the value is nil.
A number forecast operator receives bets totaling of RM18,500,000, RM16,500,000, RM19,500,000 with cash payable to identified successful punters amounting to RM7,500,000, RM22,500,000, RM 6,600,000 for three draws respectively in July and August 2019.
In the case of a non-cash prize, a winner of such prizes i.e. a motor car can also opt to receive cash for an amount equivalent to the purchase price of the car. The cash payment made to the winner in lieu of the passenger motor car does not form part of variable ‘B’.
Example 13:
Sherry Sweeptakes Sdn Bhd conducts a lottery where 3,500,000 tickets at RM3 each are sold. The prizes are made up of cash and non-cash prizes. Cash prizes is payable to identified successful punters of RM2,800,000 and a commercial motor vehicle worth RM106,000 for a draw on 18 October 2019. However, the non-cash prize is converted to cash of RM106,000 which as requested by the punter.
A sports club conducts a raffle offering five hampers worth RM200 each as prizes. 500 tickets at RM10 each are sold. All prizes have been won.
Example 15:
Kijang Jackpot is a service tax registered betting and gaming services provider. He conducts four draws in Jun and July 2019. A Jackpot Prize of RM2,750,000 is allocated to each draw. The Jackpot amount shall snowball to the following draw if not won. The cycle shall continue until the Jackpot is finally won. Assume there is no accumulative allotted prize money from the previous month as there was a prize payout.
Example 16:
A private club operator provides jackpot machines services i.e jackpot machines 1 & 2. He removes the coins from the machines in his club on 31 th May and 30th June 2019. The gaming machines recorded the total bets, winnings and bonus as follows:
For the category of games where the Casino Operator is a party to the wager (bets), the computation of the value of casino gaming services is in accordance with subregulation 5(1) of the Service Tax Regulations 2018 (above-mentioned) and bets are received by the casino operator and winnings on the game are paid out by the casino operator. Examples are table games and gaming machines where the players play against the casino operator.
For the category of games where the Casino Operator is not a party to the wager, service tax will be imposed on the total value of all payment in money or money’s worth received by the casino operator for conducting the game. Examples of games under this category are tournaments or any rake received by the casino operator in relation to conducting or allowing the conduct of a card game where players compete among themselves for a prize and not against the casino operator.
The computation of service tax involving various games i.e. conventional table games, electronic table games, gaming machines or counter games for a taxable period must be calculated separately according to the type of game.
Example 17:
Computation services tax in May and Jun 2019 is as follows:
Responsibilities of a Registered Person
A registered person is responsible to:
(i) Charge service tax on taxable services,
(ii) Issue invoices and receipts with specific particulars,
(iii) Submit service tax return SST-02 electronically and pay service tax before due date,
(iv) Keep proper records.
Frequently Ask Question (FAQs)
Q : A new gambling operator provides betting and gaming services in number forecasting and received bets totalling of RM1,500,000 with cash payable to identified successful punters amounting to RM700,000 for one draw in July 2019. Is he required to apply for registration?
[Note: Assume rate of service tax is 6%]
A : The value of taxable services of the gambling operator needs to be determined as follows:
A : Yes, the administration fee is subject to service tax as this is a charge for a taxable service.
Q : The number forecast operators are required to make mandatory contribution to the National Sports Council based on 10% of the net profit before tax. Is there any service tax liability on this contribution?
A : No. Such contribution is not subject to service tax.
Q : How should a casino operator be registered for service tax if they also carry on other businesses?
A : If a casino operator carries on other businesses such as hotels, restaurants, theme park, retail outlets and concert shows, the operation of other businesses will be registered together with the casino i.e. all the other services will be subject to service tax if the casino operator is registered.
Q : Is online gambling activity subject to service tax in Malaysia?
A : No, such activity is not subject to service tax in Malaysia.
Q : A casino operator received total collections of RM1,000,000 and the total cash pay-outs to successful players is RM400,000 for the taxable period of September and October 2018. The casino operator makes net winnings of RM600,000. What is the SST amount to be accounted for in the taxable period if the casino duty is RM150,000 (25% x RM600,000)?
[Note: Assume rate of service tax is 6%]
A : No, the gambling operator is not eligible to claim a rebate on sales tax or service tax paid on his purchases in providing his taxable services
Q : I am a trader and sells gaming machines, table games and its spare parts in Malaysia. Do I get sales tax exemption on the importation of those goods in the course or furtherance of my business?
A : No. Such importation is subject to sales tax.
Q : I am an agent of promoting sweepstake tickets to the public. Do I have to be registered under the Service Tax Act 2018?
A : No, you are providing services on behalf of a principal to a third party and earns commission. Hence, you are not liable to be registered as the service that you provide is not a taxable service.
Q : The tickets are printed overseas and printing takes five months to be confirmed in advance of the date the sweepstake tickets are intended to be released for sale. The foreign printer will print the sweepstake ticket with the words “inclusive of GST” or “inclusive of 6% GST” for draw conducted from Jun 2018 to January 2019. Is he allowed to sell those tickets during the period?
A : Such tickets for the numbers drawn from Jun 2018 to November 2018 are allowed to be sold during the period. However, the sales of tickets for numbers to be drawn on December 2018 onwards are subject to the Director General approval.
Q : A gambling operator receives technical services for maintaining the gaming machines from ABC Sdn Bhd. Does he need to pay service tax on the services?
A : He needs to pay service tax if ABC Sdn Bhd is registered under the Service Tax Act 2018.
Q : A gambling operator receives services for monthly collections’ removal from the gaming machines from XYZ Sdn Bhd. Does he need to pay service tax on the services?
A : He needs to pay service tax if XYZ Sdn Bhd is registered under the Service Tax Act 2018.
Q : A casino operator gives complimentary warrants and e-credits to their clients who will participate in casino gaming under promotion programs. Can the casino operator exclude them from the total collection in variable ‘A’ under subregulation 5(1) of the Service Tax Regulations 2018?
A : No, such complimentary warrants and e-credits has to be taken into account in the total collection in variable ‘A’ under subregulation 5(1) of the Service Tax Regulations 2018 (above-mentioned) in the taxable period in which the taxable service takes place.
Q : A casino operator provides cheque cashing facility to their VIP clients who will participate in casino gaming. However, a few cheques are dishonoured by the bank. Can the casino operator exclude them from the total collection in variable ‘A’ under subregulation 5(1) of the Service Tax Regulations 2018?
A : No, the value of the dishonoured cheques has to be taken into account in the total collection in variable ‘A’ under subregulation 5(1) of the Service Tax Regulations 2018 (above-mentioned) in the taxable period in which the taxable service takes place.
Q : Platinum Sweep Sdn Bhd conducted a lottery offering a Toyota Vios worth RM90,000 and cash prizes worth RM150,000. For the lottery, Platinum Sweep Sdn Bhd sold 200,000 tickets @RM3 in August 2018 and 300,000 tickets @RM3 in September 2018. The draw was conducted on 15.9.2018. All prizes have been won. What is the service tax amount to be accounted for the lottery by Platinum Sweep Sdn Bhd?
[Note: Assume rate of service tax is 6%]
[Note: Assume rate of service tax is 6%]
A : The collections removed on 3.9.2018 are inclusive of service tax at the rate of 6%.
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Edited by: 浪子
Bibliography
Royal Malaysian Customs Department. (2018). Guide On Betting And Gaming. Retrieved from
https://mysst.customs.gov.my/assets/document/1.%20Guide%20on%20Betting&Gaming~1.pdf
SST - Guide On Betting And Gaming
Reviewed by 浪子
on
September 03, 2018
Rating:
Reviewed by 浪子
on
September 03, 2018
Rating:
