How does the GST Relate to Clinical Trials in Malaysia
In view of the imposition of Goods and Services Tax (GST) on the 1st April 2015 in Malaysia, CRM would like to highlight certain issues/questions that you may have regarding GST and how it relates to clinical trials in Malaysia.
1. Can the clinical research industry or sponsors & Contract Research Organization (CROs) be considered for zero-rating or exemption from the GST, in view that:
- ISR can be considered as FDI.
- ISR is helping to develop R&D capability in Malaysia.
- Malaysian patients are benefitting.
2. Should sponsors & CROs submit for GST return on a monthly or quarterly basis?
The default is quarterly basis. If the annual turnover is more than RM5 million, then the sponsors & CROs are allowed to submit monthly. If the annual turnover is less than RM5 million, then they would have to submit quarterly. However, they have the option of requesting to the DG Customs if they want to submit on a monthly basis.
Note: A company or entity has to be registered mandatorily under GST if annual turnover exceeds RM500,000.
3. For work completed before 1st April 2015, but payment is made or received after 1st April 2015.
a) Is the payment subject to GST?
No, the payment is not subject to GST if the work was completed before 1st April 2015. Please refer to S.183(1) GST Act 2014.
b) Should the invoice be backdated to before 1st April 2015?
The invoice can be issued as usual, no back-dating required. But need to attach supporting documents to show that the work was completed before 1st April 2015.
4. A local company (CRO/sponsor) signed the contract (eg. Clinical Trial Agreement - CTA), but request for invoices to be addressed to a foreign party (eg. the CRO’s Asia Pacific Regional Office).
a) Is GST chargeable in the invoice?
Under GST, the services performed in Malaysia will be subjected to GST. The tax invoice must be issued with GST by the service provider to the recipient. If the recipient is registered under GST, the recipient can claim input tax claim. If tax invoice is billed to the global or regional office (overseas), input tax cannot be claimed by the global/regional office since they are not GST-registered. GST can only be claimed back if the invoice is addressed to a local address/entity (provided they are GST registrant).
(b) Should invoices addressed to foreign parties be amended to show a local company or address?
If they want to claim back the GST paid, then they need to use a local company or address that is GST-registered with Customs.
Recommendation by CRM
For clinical trials conducted in Malaysia, if the CRO or sponsor wants to claim back any GST paid to Customs, then will need to ensure that the invoice is addressed to a local company/address that is GST-registered with Customs. Otherwise, they will not be able to claim back the GST.
(c) If an amendment for GST on an ongoing CTA which is signed in 2014 by a foreign company is done, is there a need to ensure that a locally registered company sign the amendment or can the foreign company still sign the CTA?
The MOH encourages a local entity to sign the CTA but if the PI and foreign entity both agree, then for the time being, the CTA can be proceeded without involving a locally registered company. If the contracting party is a foreign company, then its services are not subjected to GST.
5. Assuming the CTA has been signed by a foreign sponsor/CRO, will CRM charge GST to the overseas sponsor/CRO?
6. For agreements/contracts that have been signed previously, but not completed before 31st March 2015, will it now be subjected to GST?
(b) Agreements/contracts will need to be reviewed/amended to reflect imposition of GST on the balance value or scope of work that remains to be done after 31st March 2015.
Recommendation by CRM
CRM is studying possible methods to fulfil the legal requirements but without the need to amend existing CTAs. One option is to affix an Addendum to the existing CTAs.
6. For invoices issued by CRM, which items will be subjected to GST?
(b) Monies that are due to the P.I or service providers is not subject to GST in the invoices issued by CRM, because that portion or amount is not an income or revenue of CRM but instead received on behalf of the PI/service provider and will be paid to the PI/service provider.
7. Should the Principal Investigator charge GST to the CRO or sponsor?
(b) If the P.I’s extra income (from all sources but excluding monthly salary) is less than RM500,000, the P.I does not need to register with Customs for GST.
(c) P.I’s that charge CROs/sponsors for GST will have to pay the GST to Customs. They can later claim back the GST by submitting monthly or quarterly returns to Customs. (refer to Q.2)
Recommendation by CRM
Based on CRM’s records, no P.I currently makes RM500,000 or more annually from doing clinical trials.
P.I’s that do make extra income exceeding RM500,000 (from whatever sources but excluding monthly salary), is mandatorily required to register with Customs for GST.
8. How will GST affect the clinical trial budget?
(b) Outsourced services such as MRI, CT scan, lab test, archiving services, etc. will be subject to GST if the vendor is not registered with MOH as a private healthcare facility under the PHFSA 1998 and is GST-registered with Customs.
Recommendation by CRM
Further discussion needed with P.I.s and industry on how best to manage this.
Note: Private healthcare facility registered under the PHFSA 1998 cannot charge “output GST” and cannot claim “input GST” from Customs.
9. How will the GST be reflected in the CTA?
Parties to the CTA will have to differentiate between private healthcare facilities registered or licensed with MOH which are exempted from GST under Paragraph 18, GST, and out-sourced facilities and services other than the above, and also consider if the PI is registered or not with Customs.
Recommendation by CRM
10. How will the implementation of GST affect the timeline for CTA payments if payments is made per quarterly basis?
11. Can a CRO claim input GST from local vendors/sites?
12. Is GST applicable for private hospitals?
Recommendation by CRM
Private healthcare facility registered under the PHFSA 1998 cannot charge “output GST” and cannot claim “input GST” from Customs.
13. Is GST applicable for private labs providing CT scan services?
GST is applied to outsourced services such as CT scan services and lab services if the vendor is not registered with MOH as a private healthcare facility under the PHFSA 1998 and is GST-registered with Customs.
14. If the SC’s fees belong to CRM within the study budget, (regardless if the PI is GST registered or not), will CRM charge the 6% GST for the SC fees to the PI?
15. How does GST affect payments to the university hospitals which are under the MoE?
16. If the SC’s fees belong to CRM within the study budget, (regardless if the PI is GST registered or not), will CRM charge the 6% GST for the SC fees to the PI?
17. Currently, majority of sites do not generate “tax invoice” for PI/site payment and payment is generated based on CRA’s tracker. Upon GST implementation, local sponsor can only make payment with tax invoices.
Yes, CRM can issue the tax invoice if the study budget is managed by CRM. If the PI’s income (excluding monthly salary) exceeds RM 500,000, another tax invoice from the PI will be issued.
(b) For payment to Societies (if the study budget is managed by them), can the Society generate “tax invoice”? If not, can the PI or hospital issue a tax invoice?
For payment to Societies (if the study budget is managed by them), can the Society generate “tax invoice”? If not, can the PI or hospital issue a tax invoice?
Recommendation by CRM
CROs/sponsors are requested to seek clarification from any Society that is managing their trial budgets.
18. How long will the refund of GST take?
19. Payment is tracked at study site level and made by sponsor to CRM via cheque with supporting documentation/tracker on the payment breakdown. How will the tax invoice be issued? Does it breakdown the items or split between non-GST and GST? Will tax invoice be issued before a payment is made to CRM or after the payment?
Sample of a tax invoice from CRM is attached for reference.
20. What will be the expected turn-around time for CRM to issue a tax invoice?
Note: CROs – Contract Research Organizations | CTA – Clinical Trial Agreement | PI – Principal Investigator/Doctors
