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Goods and Services Tax

Goods & Service Tax

This Frequently Asked Questions (FAQ) provides answers pertaining to the implementation of Malaysia’s Goods and Services Tax (GST). The FAQ will be updated as and when there are changes received from Customs. For further information, please visit the official GST website at http://www.gst.customs.gov.my/


Frequent Asked Questions (FAQ) For Participants

When will GST be implemented?

GST will be implemented with effective from 1 April 2015.

What is the difference between the current sales and service tax and GST?

Sales Tax and Service Tax have been found to be less effective, efficient, transparent and business friendly because it is a single tier tax as opposed to Goods and Service Tax (GST) which is a multi-tier consumption tax.

Under GST, payment of tax is made in stages by each level of the distribution process/ supply chain. GST covers all sectors of the industry and is a tax on final consumption of goods and services, where businesses are able to claim back as credit the GST paid for goods and services they have acquired for the purpose of business, thus eliminating the cascading effect under the current sales tax. Goods which are now subject to sales tax should experience a reduction in prices due to the elimination of the cascading effect, whereas an increase in prices currently not subject to any sales or service tax will not be more than the GST rate proposed (6%).

Will I be charged GST on the products I purchase?

GST treatment based on different product as follows:

Product GST Treatment

General Takaful

Subject to GST at 6%

Family Takaful

Not subject to GST

Investment link product (ILP)

Not subject to GST

Takaful to cover risks located outside Malaysia such as:

  • Overseas investment Takaful
  • Travel Takaful for international journey
  • Export credit takaful services

Subject to GST at 0%

 

Currently, there is stamp duty imposed on takaful certificates. Will stamp duty still be applicable?

GST replaces the existing sales tax and service tax regime and as such, stamp duty continues to be applicable with the introduction of GST on 1 April 2015.

Is stamp duty is subject to GST?

Stamp duty is not subject to GST.

If I purchase a takaful package with personal accident and family takaful, do I have to pay GST?

As family takaful is not subject to GST, the takaful operator will apportion the charge of the Takaful package so you will only be required to pay GST on personal accident takaful.

How is GST calculated on a general takaful contribution sold to me?

Description Total (RM)

Basic contribution
Loading

780.00
300.00

Total
(-) Non-claim discount

1,080.00
(450.00)

Gross contribution
(-) Rebate

630.00
40.00

GST (6%)
Stamp duty
Contribution payable

35.40
10.00
635.40

 

Is GST applicable on general takaful product that covers risk both Malaysia and Outside Malaysia?

Such certificates for local and international coverage will be subject to GST.

Is GST applicable on takaful certificates issued by a Malaysian takaful operator to cover a property outside Malaysia?

As the property is located outside Malaysia (i.e. risk location outside Malaysia), the takaful contribution will be subject zero-rated supply (i.e. GST at 0%).

Is GST applicable on takaful certificates sold to a participant based in Designated Areas (i.e. Labuan, Tioman and Langkawi?

Any general takaful issued by a takaful operator located outside Designated Areas to participant based in Designated Areas for the purpose of covering risks in a designated area will be subject to GST at 6%.

I am a GST registered person, in carrying out my business, I purchase takaful product for my business. Am I entitled to claim input tax?

A person is entitled to claim input tax if he is making a taxable supply and satisfies the following criteria:

(a) Input tax has been incurred;

(b) Input tax is allowable;

(c) He is a taxable person, i.e. a person who is or is liable to be registered; and

(d) The Takaful products are acquired for business purposes.

In view of the above, your entitlement to claim input tax is based on the type of takaful product purchased:

Product GST treatment Claiming of ITC

Family Takaful

Exempt

(Not subject to GST)

No GST incurred.

General Takaful

Standard rated

(Subject to GST at 6%)

Input tax claimable

Medical and Personal Accident Takaful

Standard rated

(Subject to GST at 6%)

Blocked input tax credit.

 

What is the GST treatment on the takaful contract surrender fee charged and the cash value paid out by the takaful operator when the participant surrenders a takaful contract?

The surrender fee will be subject to GST at a standard rate while the cash value paid out is not subject to GST.

What are the GST implications in the event of a cancellation of a general takaful contract which entails a refund of contribution to the participant?

When takaful operator refunds contribution due to cancellation of general takaful contract which has been subject to GST at 6%, the takaful operator needs to issue a credit note to the participant when he refund the contribution and GST amount charged previously.

Fees are charged for processing termination of group and individual ordinary family plans due to expiry and other causes such as switching to other plans. Are the fees subject to GST?

Yes, the fees are subject to GST at a standard rate.

General Info

When will GST be implemented?

GST will be implemented with effective from 1 April 2015.

Will there be any changes within ZIMB in terms of its operations, policy terms and payments after the implementation of GST?

Employees will be informed of the relevant changes in ZIMB in due course. Products and services offered by Zurich have been given the appropriate GST treatment. GST will be charged on the premiums for medical, critical illness without natural death benefits, personal accident and general insurance policies. Products and services offered under the life insurance category and insurance covering risks outside of Malaysia will not be subject to GST.

What is the difference between the current sales and services tax and GST?

Sales Tax and Services Tax have been found to be less effective, efficient, transparent and business friendly because it is a single tier tax as opposed to the GST, which is a multi-tier consumption tax.

Under GST, payment of tax is made in stages by each level of the distribution process or supply chain. GST covers all sectors of the industry and is a tax on final consumption of goods and services, where businesses are able to claim back as credit the GST paid for goods and services they have acquired for the purpose of business, thus eliminating the cascading effect under the current sales tax. Goods which are now subject to sales tax should experience a reduction in prices due to the elimination of the cascading effect, whereas an increase in prices currently not subject to any sales or services tax will not be more than the GST rate proposed (6%).

Are free trade zones and all previously exempted services tax criteria unchanged?

No. The conditions for exemption from Services Tax are not the same as the conditions for exemption under GST. General insurance and reinsurance services supplied by Zurich located in the Principal Customs Area (PCA) covering risk in PCA, Free Trade Zones or designated areas will be subjected to GST at a standard rate.

*Designated areas are Labuan, Langkawi and Tioman.

Customers

Will I be charged GST on any insurance products purchased?

GST of 6% will be charged on insurance products that fall under the following categories:

  • General Insurance i.e. motor, personal accident, medical, house, asset insurance etc.
  • Medical, critical illness without natural death benefits, personal accident etc.

Insurance which covers risks located outside of Malaysia is also not subject to GST. These include:

  • Overseas investment insurance
  • Travel insurance for international journeys
  • Export credit insurance services

Do I have to pay GST if I purchase an insurance package which combines personal accident or medical coverage and life insurance?

As life insurance is not subject to GST, we will separate the insurance package charges, so you will only be required to pay GST on the personal accident or medical insurance premium.

Any impact on the maturity value and surrender value if GST 6% started in 2015?

Maturity value and surrender value is not subject to GST. Surrender fee (if any) is subject to 6% GST.

Currently, there is stamp duty imposed on takaful certificates. Will stamp duty still be applicable?

Yes, Zurich will issue a tax invoice if the premium or fees is subject to GST.

How do I pay the GST amount for Unit Deducting Rider (UDR) of my investment-linked policy?

The GST amount payable on applicable UDR will be deducted from your Investment Account.

How do I pay the GST amount for Personal Accident or Medical and Health or Critical Illness under the Comprehensive Group Insurance Scheme (CGIS) policy?

The GST amount payable on applicable insurance coverage will be deducted from your Accumulated Cash Benefit or Accumulated Insurance Fund.

Intermediaries (Sales Advisors/ Brokers)

As an insurance Sales Advisor, I collect premiums paid by Zurich’s customers and pass these on to Zurich. Am I supposed to charge GST on the premium amount and remit GST to Customs on my GST return? What about the payment I make to Zurich?

No, as an insurance Sales Advisor, you are not the one providing the insurance coverage, Zurich is. It is Zurich’s responsibility to account for any applicable GST on the premium. There is no need to withhold GST on the amount received from the customer. When you remit the premium to Zurich, it should be the whole amount received inclusive of GST.

Am I required to register for GST?

You are required to register for GST if your total taxable business turnover for the past twelve months has exceeded the threshold of RM 500,000. Businesses which have not reached the threshold amount can voluntarily apply to be registered under the GST. However, once registered, the businesses must remain in the system for at least two (2) years.

What will happen if I fail or am late in declaring and remitting the GST amount to Customs?

If you are registered for GST, then you are required to submit your GST return form (GST-O3) to Customs no later than the last day of the following month after the taxable period.

The penalties for late payment and submission of the GST return have not been announced or made known to the public. However, based on previous versions of the law, we anticipate that the penalty would be based on certain amount of percentage (e.g. 5%) of the outstanding amount due. The percentage value will be determined according to how late the payment and submission are.

Current guidelines state that it is an offence if a registered person fails to pay tax due and payable within the stipulated period, and shall on conviction, be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding three (3) years or to both.

How is the GST registration process and when can I register?

You will need to complete the GST-O1 application form which is available at any Customs office or downloadable from the GST official website at http://www.gst.customs.gov.my/. Application can be made either online or manually by mailing or personally submitting to any Customs office. You can start registering from 1 June 2014 onwards. Upon successful application, you will receive an approval letter which will provide you with your GST registration number and effective date of GST registration. *A license in the form of a hard copy will not be issued.

As an insurance Sales Advisor/broker, I receive a commission fee from Zurich when I sell one of its insurance policies. Is this commission subject to GST and what about billing?

Yes, if you are registered for GST, then the services you provide to Zurich in selling policies and supporting the customer throughout the length of the insurance policy will be subjected to GST. We encourage all our Sales Advisors to agree with Zurich to be ‘self-billed’, which means Zurich will pay your commission inclusive of GST and provide you with a tax invoice. You will need to declare and remit the amount of GST to Custom.

As an insurance broker, I provide advisory and consultancy services to my client. Are these subject to GST?

Yes, advisory or consultancy services in which a charge is in the form of commission, brokerage fees or reinsurance brokerage or commission will be subjected to GST. You must be a registered Sales Advisor to be able to charge GST.

As a registered insurance Sales Advisor, I incur expenses in the course of my business such as parking charges, petrol and mobile phone calls. Am I able to claim full input tax* credit on these expenses?

If you have registered for GST, you can claim full input tax credit provided that these expenses have been used for the purpose of business and for making taxable supplies.

*input tax is the GST incurred on any purchase of goods and services by a taxable person for making a taxable supply in the course of business.

Will Zurich provide us briefing on GST? Will we be informed on the changes made to the company?

Yes. Zurich has provided briefing and training on GST to all its Sales Advisors as well as its employees and will continue to provide necessary updates. GST training materials are available on AMSS and e-insurance. You will receive a GST booklet which will also be available on the Sales Advisors' portals by 1 April 2015. Additionally, posters on GST are distributed to all Zurich branch offices nationwide. For more information and latest updates on GST, you may visit www.zurich.com.my/GST.

What will happen if my client refuses to pay GST?

Full payment of the total premium amount payable (inclusive of GST) is required to ensure that they enjoy uninterrupted original insurance coverage.

Clause

Once GST is implemented, will insurance premium be inclusive of GST?

Existing products are GST exclusive. Once GST has been implemented, Zurich reserves the right to charge GST on top of the amount initially charged.

Transitional Rules - GST on Spanning Amount

My insurance premium is charged for the period of 1 July 2014 to 30 June 2015. The GST implementation date is 1 April 2015. How will GST be charged on my insurance premium?

GST will be charged for the period of coverage from 1 April 2015 onwards.

Example:

If insurance premium is charged for the period of 1-07-2014 to 30-06-2015
GST will be charged for the period of coverage from 01-04-2015 to 30-06-2015

Spanning period = 3 months
Annual premium (12 months) = RM 3,600.00
Amount subject to GST = (3/12 * RM 3,600) = RM 900.00
GST chargeable at pro-rated = (6% * RM 900) = RM 54.00


No GST will be charged if the insurance premium has already been charged with services tax.

What will happen if I fail to pay the pro-rated GST amount?

Should you choose not to pay the pro-rated GST amount, Zurich reserves the right to deduct the prorated GST amount from the surrender/maturity/claim proceed.

Will all insurance premiums and services which extends over 1 April 2015 be subject to GST?

Services provided before the appointed date or which extends over the appointed date is not subject to GST. Premium charged that has been fully or partially paid before the appointed date is not subject to GST which includes Motor vehicle insurance. Insurance premium which has already been charged with service tax is also not subject to GST.

If I purchased takaful product before 1 April 2015 and the takaful coverage period spanning after 1 April 2015, is the product subject to GST?

For the following takaful products issued before 1 April 2015 for the takaful coverage spanning after 1 April 2015, the government has given relief (exemption from tax) (i.e. not subject to GST) if the payment made in full or part before 1 April 2015:-

1. Motor vehicle takaful.

2. Fire takaful. 

I have purchased a Takaful product before 1 April 2015 with risk coverage of 1 year period, i.e. from 1 march 2015 until 1 March 2016, I have been charged and paid service tax for the product, do I still need to pay GST?

Where the provision of takaful has been charged service tax, the supply made on or after 1 April 2015, is not chargeable to GST.

Note:

Risk in Malaysia: Risk coverage in Malaysia includes Designated Areas i.e. Labuan, Langkawi and Tioman.

Risk outside Malaysia: Risk coverage in other places, other than Malaysia.