GST | Frequently Asked Questions

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

General
Q1: When will GST be implemented?
A1: GST will be implemented with effective from 1 April 2015.
Q2: Will there be any changes within ZIMB in terms of its operations, policy terms and payments
after the implementation of GST?
A2: Employees will be informed of the relevant changes in ZIMB in due course. Products and services
offered by ZIMB have been given the appropriate GST treatment; with most of our general products i.e.
personal accident and medical insurance being subjected to the standard GST rate of 6%. Products
offered under the life insurance category and insurance covering risks outside of Malaysia will not be
subject to GST.
Q3: What is the difference between the current sales and services tax and GST?
A3: 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%).

Q4: Are free trade zones and all previously exempted services tax criteria unchanged?
A4: 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 or Tioman.

Customers
Q1. Will I be charged GST on any insurance products purchased?
A1. 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.
Life Personal Accident and Life Medical products including riders.
Insurance products which are not subject to GST include:
Life insurance i.e. whole life, endowment, term life, investment linked etc.

GST | Frequently Asked Questions

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

Q2: Do I have to pay GST if I purchase an insurance package which combines personal accident
or medical coverage and life insurance?
A2: 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.

Q3: Any impact on the surrender value if GST 6% started in 2015?

A3: Surrender Value is not subject to GST. Surrender fee (if any) is subject to 6% GST.

Intermediaries (Agents/ Brokers)

Q1. As an insurance agent, I collect premiums paid by Zurichs 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?
A1. No, as an insurance agent, you are not the one providing the insurance coverage, Zurich is. It is
Zurichs 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.

Q2. Am I required to register for GST?

A2. 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.

Q3. What will happen if I fail or am late in declaring and remitting the GST amount to Customs?
A3. 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.

GST | Frequently Asked Questions

Q4. How is the GST registration process and when can I register?
A4. 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.

Q5. As an insurance agent, 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?
A5. 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 agents 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.

Q6. As an insurance broker, I provide advisory and consultancy services to my client. Are these
subject to GST?
A6. 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 agent to be
able to charge GST.

Q7. As a registered insurance agent, 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?
A7. 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

Q8: What will happen if my agent is unable to collect the pro-rata GST during the transition
period?
A8: Zurich is required to account for GST on the period of coverage after 1 April 2015. Agents who have
agreed to the terms and conditions within the agency agreement should therefore fulfill their obligations
one of which may be to take reasonable steps to recover all outstanding debts to Zurich. When an agent
is found to be in breach of such obligation, Zurich reserves the right to litigate.

Q9: Will Zurich provide us briefing on GST? Will we be informed on the changes made to the
company?
A9: Yes, you will be briefed on GST and the changes in the company in the coming months. There will be
discussions and meetings held to support our customer and vendor management, with relevant work
streams involved and training provided to our employees to ensure we are GST-ready and compliant by
our timeline.

GST | Frequently Asked Questions

Q10: What will happen if my client refuses to pay GST?

A10: If a client refuses to pay the amount of tax due on the policy under the policy terms, Zurich reserves
the right to void any coverage offered within its cooling off or warranty period.

Q11: Are ZIMB agents aware of the GST implementation? Will we be equipped with GST
knowledge to advise our agents?
A11: There will be sessions held to inform our employees on the changes and practices that will be
affected by GST in the coming months. However, agents will be required to register for GST on their own
if they exceed the turnover threshold of RM 500,000 or choose to voluntarily register. A registered agent
can claim full input tax credit on expenses incurred for the purpose of business and for making taxable
supplies and will also be charged GST on commission. Registered agents need to follow the relevant
practices for self-billing, and is responsible to provide ZIMB a GST invoice for commission fees.

Clause
Q1. Once GST is implemented, will insurance premium be inclusive of GST?
A1. Existing products are GST exclusive. Once GST has been implemented, Zurich reserves the right to
charge GST on top of the amount initially charged.
Q2. Zurich recently inserted the GST clause into its terms and conditions. What does this clause
imply?
A2. The GST clause is inserted to allow Zurich to collect GST from policyholders on behalf of the Custom
during the transitional period for policy coverage beyond the implementation date of 1 April 2015.

Transitional Rules
Q1. 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?
A1. GST will be charged for the period of coverage from 1 April 2015 onwards.
Example:

Insurance premium
: RM 3, 600
Value subject to GST
: (3/12 * RM 3, 600)
GST chargeable at pro-rated: (6% * RM 900)

= RM 900
= RM 54

No GST will be charged IF the insurance premium has already been charged with services tax.
Q2. Will all insurance premiums and services which extends over 1 April 2015 be subject to GST?
A1. No, there are insurance or takaful services subject to relief from GST after the GST implementation
date. The 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. These include:
1. Motor vehicle insurance or motor vehicle takaful services
2. Fire insurance or fire insurance takaful services