Employment services provided by any person may be subjected to service tax. Employment services cover a variety of human resources services to clients. These services includes providing workers, providing employment-seeking services, assisting employers to identify suitable employees and providing human resources services.
In general, there are four categories of employment service providers:
(i) Employment placement agencies identify employment vacancies, interview jobseekers, match their qualifications and skills to those being sought by employers for specific jobs and the placing for permanent employees.
(ii) Temporary staffing agencies provide employees on a contract basis and for a limited time, to clients in need of workers to supplement their labour force.
(iii) Executive search agencies provide headhunting services which are searching, recruiting and placement services for clients with specific executive and senior management needs.
(iv) Professional employer organizations provide human resources and human resources management services to their clients.
Service Tax Treatment on Employment Services
★ Taxable employment services include:
(i) Any services of providing regular employment services to employers
(ii) Providing crew by a transport company to another transport company that sails in Malaysian waters
(iii) Provide job services for customers outside Malaysia for jobs in Malaysia
(iv) Provide employment services to complete the contract of employment with another company
★ Non-taxable employment services include:
(i) Secondment of staff within group of companies.
Secondment of staff is the assignment of an employee of one company to another company within the same group of companies for a certain period of time with no additional charges on emolument.
On expiry of the secondment term, the employee (the secondee) will return to the original employer.
(ii) Provide employment services for jobs outside Malaysia
Accounting for Service Tax on Employment Services
Service tax is only chargeable on employment services excluding of recovery expenses (disbursement).
The following charges are allowed as disbursement and are not subjected to service tax:
(i) Emolument
(ii) Levy fees
(iii) Fare to Malaysia
(iv) Work permit
(v) Insurance fees
(vi) Documentation fees
(vii) Mandatory medical screening for foreign workers
If the above charges are itemized and recovered with a margin, such margin will be regarded as taxable employment services and subjected to service tax.
If employment services and recovery of expenses charges are not shown separately in the invoice issued to a client, then service tax is chargeable on the whole amount. On the other hand, if the charges are shown separately in the same invoice or multiple invoices, service tax is only chargeable on taxable employment services.
Service tax is required to be accounted at the earlier of:
(i) At the time when the payment is received; or
(ii) On the day following the period of 12 months from the date of the invoice for the employment services provided, when any whole or part of the payment is not received.
Responsibility of a Registered Person
A registered person is responsible to :
(i) Charge service tax on his taxable services;
(ii) Issue invoices and receipts to his customers in respect of any transaction relating to the provision of taxable services;
(iii) Submit service tax return SST-02 via electronic and pay service tax before due date; and
(iv) Keep proper records with regards to his business
Frequently Asked Questions (FAQs)
Q : As a company providing employment services, how do I calculate my turnover for registration purposes?
A : The calculation of your turnover will be on:
(i) Service fee, including arranging fee
(ii) Commission or any type of consideration
(iii) Additional charges or mark up
Q : Does secondment of staff subject to service tax?
A : Yes, secondment of staff is subjected to service tax if it is made between companies not within the same group of companies and there are fees, commission or mark-up charged to the client.
Q : If secondment of staff is made between companies within the same group, does the commission received trigger service tax?
A : Yes, any fees, commission or mark-up charged will trigger service tax.
Q : Does secondment of staff need to have contract or agreement?
A : To qualify as a secondment of staff, the service provider (seconder) is required to keep proper records of the secondment such as contract, agreement or any relevant supporting document.
Q : As a holding company, should I account for service tax if I provide free employment services to my subsidiary?
A : No, if there is no charge on the services rendered. However, service tax is applicable if you recover it from a subsidiary as a management fee.
Q : If I issue an invoice in detail (itemised), is service tax charged on the mark-up value or on the value of invoice?
A : Service tax will be charged on the fees, mark-up or commission only. However, if you do not itemised your services on the invoice issued to your client, service tax will be imposed on the total amount of the invoice.
Q : If I am providing employment services for job outside Malaysia, do I have to account for service tax?
A : Employment services provided for job outside Malaysia is not subjected to service tax.
Q : If I am providing employment services partly for job in Malaysia and partly for job outside Malaysia, how do I account for service tax?
A : Service tax is only applicable on employment services made in Malaysia. You may use a reasonable method in determining the value of taxable employment services.
Q : Zul Cari Kerja Sdn Bhd (ZCK), a provider of employment services provides staff to be based at the client’s premise. ZCK pays its staff a monthly salary of RM5,000 and charged the client RM15,000 [RM5,000 (advance first month staff salary) plus RM10,000 (employment service fee)]
Miscellaneous expenses incurred by ZCK are as follows:
FOMEMA medical examination RM 150
Work Permit RM 50
From the situation given, how does ZCK account for service tax?
A : (i) If ZCK itemised all of the charges on the same invoice, only the fee on employment services is subjected to service tax, while the allowable disbursements are not subjected to service tax.
Edited by: 浪子
Bibliography
Royal Malaysian Customs Department. (2018). Guide On Employment Services. Retrieved from
https://mysst.customs.gov.my/assets/document/1.%20Guide%20on%20Employment%20Ser~1.pdf
SST - Guide On Employment Services
Reviewed by 浪子
on
September 01, 2018
Rating:
Reviewed by 浪子
on
September 01, 2018
Rating:
