No Escape From Credit Card Service Tax

For all Malaysians who carry credit cards, looks like your faint hope of the Government withdrawing their decision to charge service tax is in wane! In the light of Government's push for "prudent spending", better act smart now!

If you try to contact your banks these few days, chances are the phone lines could be jammed with traffic!

However, the good news is that you are unlikely to be charged the service tax immediately, as the fee is only payable when new credit card is issued, or upon the anniversary date of the credit card issuance.

For example, if a credit card is issued to a new cardholder on Jan 15, 2010 with a validity period of a year expiring on Jan 14, 2015, a service tax of RM50 would be chargeable on Jan 15, 2010. On the anniversary date of the following years (i.e., Jan 15 for year 2011, 2012, 2013 and 2014), the same amount of tax will be charged again on the respective dates.

For existing cardholders, for cards issued on Sept 18, 2008 with a validity period of five years and expiring on Sept 17, 2013, service tax would be charged on its anniversary date on Sept 18, 2010, followed by Sept 18 2011 and Sept 18, 2012. However no tax will be levied for 2009 given that the policy will only be effective Jan 1, 2010.

Credit cardholders can expect to see the payable amount of service tax in their statement separately.

In the event a credit card is upgraded (such as in the case of a Classic card to a Gold card) or downgraded (such as in the case of a Gold card to a Classic card) or converted (such as in the case of an Islamic card to a conventional card) or reinstated (such as in the case of a cancelled card), the service tax will be charged on the new cards issued unless the anniversary dates of the previous and the new cards are the same,

For supplementary card holder, the amount of tax levied is RM25 per card.

The above tax applies to both credit cards or charge cards, but not on cash cards such as debit cards, petrol cards, closed community charge cards, loyalty cards and e-money like “Touch n’ Go”.

Another piece of good news is that most banks have agreed to allow card holders to pay the service tax via reward point redemption. The estimated point for redemption is about 10,000 bonus point for principal card and 5,000 point for supplementary card. However, the points could vary from bank to bank.

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