Malaysian Credit Card Holders Start To Pay Service Tax

by Mary Swire, Tax-News.com, Hong Kong

04 January 2010

The service tax on credit cards in Malaysia, targeted at encouraging prudent spending and originally announced in the budget last October, came into force on January 1, 2010.

The Association of Banks in Malaysia (ABM) has been given a copy of the guidelines issued by the Ministry of Finance for the imposition of the service tax, which is MYR50 (USD14.75) per year on each principal credit card or charge card, and MYR25 per year on any supplementary card.

ABM has informed cardholders that the service tax will be collected by banks and other card issuers from credit cardholders and will be set out in the cardholder's monthly statement separately.

It becomes chargeable at the time when the credit card or charge card is issued, on its anniversary date (if its validity period is longer than one year) or upon renewal.

It has been confirmed that debit cards, petrol cards (cards issued by petrol companies), closed community charge cards (used at work places, schools and clubs only) and loyalty cards do not fall under the purview of the imposition of the service tax, and that it will not be charged on replacement cards issued in connection with lost or spoilt cards or fraud.

Banks and other card issuers are allowed to enter into arrangements where cardholders may apply redemption/reward points, or rebates they earn through using their cards, for the payment of the service tax.

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