This document discusses various topics related to GST for legal practitioners in Malaysia, including client accounts, advance payments, contingency fees, disbursements, and costs awarded by courts. It provides definitions and guidelines for how different types of funds and payments should be treated for GST purposes. For example, it states that money kept in client accounts is only taxable when transferred for legal fees, while disbursements paid to third parties on a client's behalf are not subject to GST.

1. Loh Boon How
Chartered Accountant
GST ON LEGAL
PRACTITIONER 2
Updated
3/9/14

2. B. H. Loh & Associates 2
What is client account?
• The money paid by client will be kept in client
account,
• The transfer of money from client account only
allowed the solicitor remuneration purpose. The
GST will be accountable.

3. B. H. Loh & Associates 3
What is client account?
The funds that must be deposited into the client’s
account
Client income Description
Trust money
Sum of money
by mistake or
accident
Contravention of sub rule (2) of
rule 8 of the rues
Deposition cost,
witness fee and
filing fee
To defray anticipated costs that
will arise during the course of
representation

4. B. H. Loh & Associates 4
What is client account?
The funds that must be deposited into the client’s
account
Client income Description
Advances fee Secured fees to be earned by
the legal practitioners until
fees are earned and client is
billed
Rule 5 received Those received should be
split but fail to split

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What is an advance payment?
• A retainer fee,
• A client pay to his or her legal practitioner before
the legal practitioner begins working on the
cases,
• The money is placed in a separate account from
the legal practitioner’s personal fund and to avoid
use of the money for their own purposes.

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What is an advance payment?
Description Treatment
(a) The deposit form part
payment of the total
consideration payable
GST
chargeable
(b) The deposit as security and
will be fully refunded upon
completion of services
No GST
chargeable
Account for GST on the date of receipt or payment

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What is the contingency fee?
Situation Outcome
If the client
win the case
The legal practitioner is paid by
taking a percentage of the client’s
money award,
If the client
lose the case
The legal practitioner receives
nothing
• Cases such as personal injury litigation,
employment matters and even medical
negligence,
• The contingency fess is not allowed in Malaysia.

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What is the contingency fee?
• The GST is chargeable either :
(a) When he receives any percentage of the
client’s monetary award,
(b) On the date of issue of tax invoice

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What is the disbursements?
Disbursement is not a solicitors remuneration
No. Description
(a) The registration of documents
(b) Stamp duties
(c) Counsel’s fees, auctioneer’s or valuer’s fees
(d) Travelling or accommodation expenses
(e) Fees paid on searches
(f) Costs of extracts from any register or record

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What is the disbursement?
No. Description
(g) The cost of any extra work
(h) Fee relating to any business of a
contentious nature
(i) Fees relating to any proceeding in any
court
(j) Miscellaneous expenses not exceeding
RM50
(k) Other disbursements reasonably incurred

11. B. H. Loh & Associates 11
What is the disbursement?
• Travelling and accommodation expenses are not
disbursements and must be included as part of the legal
practitioner’s overall charge.
• The expenses are incurred in the course of providing
services to a client.
• These expenses not a reimbursement as the service
supplies to the legal practitoner not to the client. Therefore
are chargeable to GST.

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What is the disbursement?
• The 3rd party report,
• If for own use – part of the cost in providing services,
• If such reports for the client – disbursement.
• When an expert report acquired by legal practitioner – a
disbursement,

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What is the disbursement?
• The witness fee on behalf the client,
• To cover their travelling expenses to and from the
court and compensation for loss of time,
• Witness fee can be regard as disbursement and
not GST is chargeable.

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What is the disbursements?
No. Charateristic
(a) The legal practitioner acted for his client when
paying the 3rd parties
(b) The client actually received and used the
goods or services provided by the 3rd party,
(c) The client knows that the goods or services
would be provided by the 3rd party,
(e) The client authorised the legal practitioner to
make payment on his behalf,

15. B. H. Loh & Associates 15
What is the disbursements?
No. Charateristic
(f) The client was responsible for paying the 3rd
party
(g) The legal practitioner recovers only the exact
amount which he paid to 3rd party,
(h) The goods and services paid for are clearly
additional to the supplies which the legal
practitioner makes to the clients

16. B. H. Loh & Associates 16
How to differential between the supplies
and disbursement?
Circumstances The outcome
The expenses paid to a 3rd party that
have been incurred by you in the
course of making your own supply
and which are part of the whole of
the services rendered by you.
Treatment as
supplies of
services, therefore
GST output tax
chargeable.
The expenses for specific services
that have been supplied by the third
party to your client and your client’s
known and authorised
representative in paying the 3rd
party.
Treatment as
disbursement ,
therefore no GST
chargeable.

17. How to claim an input tax credit?
Source of
supplies
The input tax claimable
Goods or services
acquired locally
The input tax should be
offsetting against the output
tax,
If the input tax > output tax =
refund will be available,
The input tax can be claim
within 6 years from the date
of supplies.
Goods or services
imported
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What is the costs awarded by court?
The court costs:
i. Awarded to 1 party,
ii. Awarded to both parties, or
iii. Waived.
Normally the legal practitioner’s fee and other
disbursement of the parties.

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Thank you
B. H. Loh & Associates
Address :
No. 1-3-15, Goldhill Complex,
Tingkat Paya Terubong 1,
11060 Penang.
H/P No. : 016-4893382
Email : bhlohass@gmail.com
Web-site / facebook : bhloh.com.my