What is the implication of SST on financial products & services? (Aug 2018)

The Ministry of Finance has announced that 6% of Service Tax will come into effect in Malaysia on 1st September 2018, repealing the Goods and Services Tax (GST) which was first introduced as 6% on 1st April 2015 and further reduced to 0% on 1st June 2018.

Unlike GST which taxes all goods and services unless an exemption is provided, Service Tax is only charged on certain prescribed services made by prescribed taxable persons.

For Life Insurance products, Service Tax of 6% will be chargeable on the premiums of products below:

B2B (Business to Business) – Policies sold to an institution (where policyowner is an organization) or policies assigned to an institution (where assignee is an organization)

B2C (Business to Consumer) – Policies sold to an individual or policies assigned to an individual

For Employee Benefits products, Service Tax of 6% will be chargeable on the premiums of products below:

For General Insurance, the 6% Service Tax shall be charged on *all types of insurance contracts to cover any risks incurred in Malaysia to an individual or business organization *EXCEPT the areas listed in below.

How about those car insurance bought or renewed between June to August 2018?
Under the regulations, car insurance is subjected to a 6% tax. In this case, insurance companies can chase back the tax (although already renewed) for the period starting 1st Sept onwards on a pro-rate basis.

Not a popular one...

Provision of credit card or charge card services. A specific rate of tax of RM25 is imposed upon the issuance of principal or supplementary card and every subsequent year or part thereof.

How about investment via a unit trust (UT) scheme / private retirement scheme (PRS)?
Based on the Regulations, the services provided by asset and fund managers are excluded from the ambit of service tax. So, sales charge will not be subjected to service tax effective from 1st September 2018, which is good for the asset management industry.

How about share trading services?
Another beneficiary of SST implementation would be the capital market as well. Compared to GST, all share trading services will not be subjected to SST (although stamp duty still applies). Hopefully, more retail participation could be seen after 1st September 2018.

The 5 companies that Khazanah Nasional invested in may surprise you !!!

First of all, we have to bid farewell to Tan Sri Datuk Azman Mokhtar for his great leadership and guiding the investment arm of our government - Khazanah Nasional Bhd - for the past 14 years. Also, this should extend to all board members who were collectively resigned voluntarily last month.

Khazanah Nasional Berhad is the strategic investment fund of the Government of Malaysia. We are entrusted to hold and manage the commercial assets of the Government, and to undertake strategic investments on behalf of the nation.

Spectacular performance for the past 14 years !!!

RAV: Market value of all equities, securities and cash held;
NWA: RAV less Total Liabilities and adjusted to measure value created

Interesting companies that were invested by Khazanah Nasional Bhd:

It's no stranger to the world. The company provides the fundamental technology infrastructure and marketing reach to help merchants, brands and other businesses that provide products, services and digital content to leverage the power of the internet to engage with their users and customers. Alibaba’s businesses are comprised of core commerce, cloud computing, digital media and entertainment, innovation initiatives and others. Through investee affiliates, it also participates in the logistics and local services sectors.

From this investment alone, it was reported that Khazanah made a handsome RM6billion profit from it.

Sea, headquartered in Singapore, was founded in 2009 by Forrest Li with the mission to better the lives of consumers and small businesses in the region with technology. Since its inception, Sea, previously known as Garena, has grown swiftly to become a leading platform provider for online PC and mobile digital content, e-commerce and payments across Southeast Asia and Taiwan, serving millions of users.

Through Sea, Khazanah reaped the fruits when the company was being listed on the NYSE end 2017. Still no idea of what the company does? Think about below two things...

The popular online game is from a subsidiary of Sea

The online e-commerce website having a foothold in the south-east Asian contries

Or called "Word of Mouth", the company began life in 2015, groomed by Alibaba and its payment affiliate Ant Financial Services Group, to tap into the location-based assortment of catering and entertainment businesses. This is one of the latest new tech company that was invested by Khazanah following the two previous successful ones.

Koubei, a restaurant review and local services platform under Alipay, rolled out its standalone mobile app recently, as it elbowed its way into China's red hot online-to-offline commerce industry, which is now worth hundreds of billions of dollars.

Formerly known as China Smart Logistics, the logistics affiliate of Alibaba Group, is dedicated to meeting the current and future logistics demands of China’s online and mobile commerce sector. It operates a logistics information platform which provides real-time access to information for both buyers and sellers, as well as information that allows delivery service providers to improve the efficiency and effectiveness of their services.

As the business of Alibaba/Taobao/Lazada grows, this company will be the prime beneficiary of the booming e-commerce business. It's not a surprise for you to know this company, if you're one of the online traders.

Created in 2010 the company is a recognized global pioneer and leader in a sector that is already disrupting business models and will revolutionize the whole of society. What sector is it? Answer is the awesome 'IoT' (internet of things) which is a famous jargon in the 21st century.

Billions of objects worldwide will be connected to the Internet; their data will be stored in the cloud and will participate in the digitalization of our environment. Wow @@! This is just so cool and exciting.

The full list of shortlisted companies that were invested by Khazanah Nasional Bhd, by sector.