Service tax expansion won't affect everyday services, say banking groups
The tax revision would not affect services such as savings, e-wallets, credit cards or ATM transactions.
PETALING JAYA : Three major banking associations have assured Malaysians that everyday banking services will not be affected by the upcoming expansion of the service tax on financial services.
The Association of Banks in Malaysia (ABM), the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), and the Malaysian Investment Banking Association (MIBA) said the revised scope, which will take effect on July 1, would only affect selected corporate, treasury and investment banking services.
They said that essential consumer services involving fees or commissions, such as those related to current or savings accounts, e-wallets, or credit cards, would be exempted from the service tax.
Services such as cash deposits, withdrawals, payments, local fund transfers, debit card issuance and related annual fees, and ATM or branch transactions like bill payments or statement printing remain exempt from the service tax.
'These are considered essential banking services and remain out of scope for service tax purposes,' the associations said in a joint statement.
They also confirmed that interest, profit-based charges, penalties, and credit card annual fees would not be affected.
These exemptions, they said, are meant to ensure that routine banking for individual consumers remains untouched by the expanded tax framework.
'All banks under ABM, AIBIM and MIBA are committed to transparency. Where the service tax applies, the charges will be clearly indicated and communicated to customers,' the associations said.
Customers unsure of how the expanded tax scope affects them have been urged to contact their banks directly.
'The banking industry will continue working with relevant authorities to ensure this transition is handled clearly and responsibly,' they said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
an hour ago
- The Star
Muted impact on firms
PETALING JAYA: The mandatory Employees Provident Fund (EPF) contribution for foreign workers will have little impact on most businesses for now, except for those with heavy reliance on foreign labour. The impact will be greater if such companies also operate in price-sensitive markets where cost pass-through is limited. Sectors that would be most affected are plantation, gloves, technology and construction, according to CIMB Securities Research. 'Overall, we view the mandatory 2% EPF contribution as mildly negative for corporate earnings. 'We expect the earnings impact from higher labour costs – alongside the recent expansion of the sales and service tax – to be reflected progressively in the results for the second half of 2025, with a more pronounced full-year effect in 2026,' stated the research house. Starting with October's wage, foreign workers and their employers must each contribute 2% of the monthly pay to the EPF. CIMB Research foresees the initial cost impact to likely be manageable. 'However, pressure may build if the contribution rate for foreign workers is gradually increased in line with that of Malaysian workers,' it said in a note. The advantage of this EPF plan, according to economist Geoffrey Williams, is that it is being rolled out at a 'very low rate and very low cost'. This avoids imposing substantial additional cost pressures on businesses, at a time when many industry players are complaining about margin compressions. On the flip side, however, the 2% EPF contribution will hardly benefit the foreign workers, said Williams. 'The employees will save virtually nothing, the EPF will have millions of extra members but most will have virtually no savings and employers will have minimal extra costs. 'For example, for a foreign worker on a minimum wage of RM1,700, the new scheme will cost RM34 per month (employer's portion). For employers complaining of higher costs due to this, they need a reality check. If they cannot afford RM34 per month, they do not have a viable business model.' As for those with large numbers of foreign workers, Williams urged them to reduce dependency on low-wage workers if such employers feel that the cumulative cost of 2% contribution is too high. 'Employ Malaysians or invest in technology,' he said. The EPF announced that this mandatory contribution will apply to all foreign workers in Malaysia – excluding domestic helpers – who possess valid passports and work permits issued by the Immigration Department. Previously, the EPF contributions for foreign workers were voluntary. This policy change should not come as a surprise to the market, as it was first announced in Budget 2025. Under the revised framework, foreign workers will be allowed to withdraw their EPF savings upon returning to their home countries, provided their work permits have expired and there is evidence that their permanent employment has ended. With the new mandatory policy, CIMB Research said the EPF stands to benefit from higher annual contributions. 'Based on an estimated 2.5 million foreign workers earning an average monthly salary of RM2,000, the combined 4% contribution from employers and employees could generate approximately RM2.4bil in additional annual contributions to the EPF.' Meanwhile, the Small and Medium Enterprises Association of Malaysia (Samenta) national president Datuk William Ng described a 2% contribution as 'reasonable' and not something that Samenta would object to. He also told StarBiz that most SMEs which engaged foreign workers did not have a large number of such workers. 'In fact, we are more concerned over the availability of these funds to the workers upon them ceasing to work in Malaysia. 'Ideally, they should be able to withdraw the fund in its entirety upon termination of their employment and such funds allowed to be repatriated to their home country to repay loans, build houses and any other uses they may deem fit,' he said.
Free Malaysia Today
4 hours ago
- Free Malaysia Today
Service tax expansion won't affect everyday services, say banking groups
The tax revision would not affect services such as savings, e-wallets, credit cards or ATM transactions. PETALING JAYA : Three major banking associations have assured Malaysians that everyday banking services will not be affected by the upcoming expansion of the service tax on financial services. The Association of Banks in Malaysia (ABM), the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), and the Malaysian Investment Banking Association (MIBA) said the revised scope, which will take effect on July 1, would only affect selected corporate, treasury and investment banking services. They said that essential consumer services involving fees or commissions, such as those related to current or savings accounts, e-wallets, or credit cards, would be exempted from the service tax. Services such as cash deposits, withdrawals, payments, local fund transfers, debit card issuance and related annual fees, and ATM or branch transactions like bill payments or statement printing remain exempt from the service tax. 'These are considered essential banking services and remain out of scope for service tax purposes,' the associations said in a joint statement. They also confirmed that interest, profit-based charges, penalties, and credit card annual fees would not be affected. These exemptions, they said, are meant to ensure that routine banking for individual consumers remains untouched by the expanded tax framework. 'All banks under ABM, AIBIM and MIBA are committed to transparency. Where the service tax applies, the charges will be clearly indicated and communicated to customers,' the associations said. Customers unsure of how the expanded tax scope affects them have been urged to contact their banks directly. 'The banking industry will continue working with relevant authorities to ensure this transition is handled clearly and responsibly,' they said.
New Straits Times
6 hours ago
- New Straits Times
Banking associations: Expansion of service tax not affecting core banking transactions
KUALA LUMPUR: The upcoming expansion of the service tax scope, which comes into effect on July 1, will not affect basic banking services. In a joint statement, the Association of Banks in Malaysia (ABM), the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), and the Malaysian Investment Banking Association (MIBA) said basic banking services involving fees or commissions, such as those linked to current accounts, savings accounts or similar services, including e-wallets, will remain exempt from the service tax. These services include charges on cash deposits and withdrawals, payments, local fund transfers, issuance of debit cards, annual debit card fees, and basic transactions conducted at bank branches or ATMs. "In addition, annual fees imposed on credit or charge cards will also be excluded from service tax. Interest or profit, as well as penalties or other punitive charges, will not be subject to service tax," they said. The associations stated that the expanded tax scope will apply to fund management, investment banking, merchant banking, and trade financing services. Under Phase 1 of the implementation, they added, the service tax will be applied to selected treasury, corporate and investment banking services, as outlined in Appendix A of the Service Tax Guide on Financial Services. "All banks under ABM, AIBIM, and MIBA are committed to transparency. Where service tax applies, charges will be clearly shown, and customers will be clearly informed. "If customers are unsure about the impact of this expanded tax scope and require further clarification, they are encouraged to contact their bank directly," they said. Member banks of Malaysia's banking associations will begin implementing the service tax on relevant financial services in phases from July 1, in accordance with the guidelines issued by the Customs Department. This follows the recent gazettement of the service tax legislation concerning the expansion of the service tax scope.
