Introduction
Managing Malaysia’s Sales and Service Tax (SST) in Xero helps your business stay compliant with Royal Malaysian Customs Department (RMCD) requirements. Xero lets you set up, apply, and report SST transactions efficiently — reducing manual work and ensuring accurate tax filings.
How to set your SST reporting basis:
If your business reports SST on either an accrual (invoice) or cash (payment) basis, you can adjust this setting in your Sales Tax Report:
Step 1: From the dashboard, go to Accounting, choose Accounting Settings.
Step 2: Go to Accounting sections, choose Financial Settings.
Step 3: In the Tax Basis field, select Accrual Basis (recognises SST when invoices are issued) or Cash Basis (recognises SST when payments are received).
Step 4: Update your Tax Period if required, then click Save to apply your selection.
How to Set Up SST Tax Rates in Xero
Step 1: From the dashboard, go to Accounting, choose Accounting Settings.
Step 2: Go to Tax sections, choose Manual tax rates.
Step 3: Click Add New Tax Rate.
Step 4: Enter a name (e.g., “Sales Tax 8%” or “Service Tax 6%”). Fill in the tax components name (e.g., “SST”) then enter the tax percentage.
Step 5: Click Save.
Your new SST rate will now be available to apply to transactions.
How to Apply SST Tax Codes to Invoices and Bills
Step 1: When creating a new invoice or bill, locate the Tax Rate column.
Step 2: Select the relevant SST code (e.g., Sales 8%).
Step 3: Review the tax amount to ensure it’s calculated correctly. Approve the transaction.
Xero will automatically record these entries in your tax reports.
How to Run SST Tax Reports
Step 1: From the dashboard, go to Reporting, choose All reports.
Step 2: Under the Taxes and balances section, select Sales Tax Report.
Step 3: Choose the reporting period that aligns with your SST filing cycle (monthly or quarterly). Tick the details you want to include, then click Update.
Step 4: Review both the summary and detailed breakdowns. To save or share, click Export and choose PDF or Excel for your RMCD submission.
Step 5: For a more detailed view, select Sales Tax Audit Report.
Step 6: Review the individual invoice details to confirm the accuracy of your SST calculations.
How to Adjust or Update SST Rates When They Change
We recommend adding a new Tax Rate whenever there is a rate change. This allows you to maintain historical accuracy for past transactions and ensure correct reporting in Xero.
Step 1: From the dashboard, go to Accounting, choose Accounting Settings.
Step 2: Go to Tax sections, choose Manual tax rates.
Step 3: Tax rates that have already been used in invoices or bills cannot be edited. Instead, click Add New Tax Rate to create a new SST rate with the updated percentage.
Step 4: Enter a name (e.g., “Sales Tax 8%” or “Service Tax 6%”). Fill in the tax components name (e.g., “SST”) then enter the tax percentage.
Step 5: Use this new rate to all future transactions to ensure correct SST calculation. Existing transactions will remain under the old rate for audit consistency.
Common SST Mistakes in Xero and How to Avoid Them
Using the wrong tax rate: Double-check whether your transaction falls under Sales Tax (goods) or Service Tax (services).
Mixing taxable and non-taxable items: Ensure each line item has the correct SST code.
Not updating rates promptly: When the government revises SST rates, update Xero immediately.
Forgetting to reconcile tax accounts: Run periodic checks to confirm SST payable and receivable balances match your returns.
Frequently Asked Questions (FAQs) about Xero SST Malaysia Feature
Q: How often should I run SST reports?
A: Ideally monthly, even if your filing is quarterly, so you can detect issues early.
Q: Can I edit historical transactions after filing SST?
A: It’s not recommended. Instead, create adjustment journals in the next period to maintain audit accuracy.
Q: Does Xero support multi-rate SST?
A: Yes, you can set up multiple tax rates (e.g., 5%, 6%, 8%) and assign them as needed.
Q: How do I prepare my return for submission to RMCD?
A: Export the Sales or Service Tax Report from Xero, cross-check totals with your supporting documents, and use the figures when completing your SST-02 form.
Conclusion
Setting up and managing SST in Xero keeps your business compliant and saves valuable time during reporting periods. With proper configuration and regular reviews, you can ensure all transactions reflect the correct tax treatment and your RMCD filings remain accurate.