Banks assure public basic services unaffected by new service tax

KUALA LUMPUR: Member banks of Malaysia’s banking associations have assured the public that the upcoming expansion of the service tax scope, effective July 1, 2025, will not affect basic banking services commonly used by the general public.

This followed the recent gazettement of the service tax legislation concerning the expansion of service tax scope.

In a joint statement today, 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 that basic banking services that involve fees or commissions such as those related to current accounts (cheque accounts), savings accounts, or similar accounts, including e-wallets, are not subject to service tax.

“These services include fees imposed on cash deposits, withdrawals, payments, or local fund transfers; issuance of debit cards and subsequent annual fees; basic transactions done at bank branches or automated teller machines (ATMs).

“These are considered essential banking services and remain out of scope for service tax purposes.

“In addition, the annual fee imposed on credit or charge cards will also be excluded from service tax. Interest or profit and penalties or other punitive charges will not be subject to service tax,” it said.

The bank associations said the exclusions are intended to ensure that day-to-day banking activities for individual consumers remain unaffected by the service tax expansion.

They said the expanded service tax scope for financial services would generally apply to fund management, investment and merchant banking-related services, and trade financing-related services.

“Under phase 1 of the expanded service tax scope, which comes into effect on July 1, 2025, the service tax will apply only to selected treasury, corporate and investment banking services as set out in Appendix A of the service tax guide on financial services,” they added. – Bernama