Malaysia sticks to 6% digital tax, but only for services
The Malaysian government will impose six per cent tax on foreign digital service providers, effective January 1, 2020, but made it clear that no additional tax will be collected for tangible products bought through online stores.
The finance ministry defines digital services as “any service that is delivered or subscribed over the Internet or other electronic networks and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.”
Examples of digital services include software, applications, video games, music, e-books and film streaming services, subscription-based media, database, hosting and cloud storage services, advertising on online platforms, Internet-based telecommunication, e-learning and e-training, as well as booking platforms, search engines and social networks, among others and as long as they are from abroad.
First and foremost, the tax will affect digital services provided by firms such as Google Play, Netflix, Spotify, Apple Store and the likes, as well as digital game distribution companies such as Steam, Amazon’s and Adobe’s cloud services, Dropbox, Facebook advertising and Airbnb bookings, and so on. However, there would be no impact on digital payment service providers such as Alipay or Grab Pay, the ministry noted.
Enabling a better competitive environment for local companies
In Malaysia, the broad intention of this service tax extension is to level the playing field for local service providers in the area of digital technology to fairly compete with foreign firms. This is a common theme among such global legislative amendments and implementations.
Still, the digital tax rate in Malaysia is low in comparison to other countries. For instance, Russia introduced a similar tax on digital services tax for foreign suppliers in 2017 at the then rate of 18 per cent (increased in January 2019 to 20 per cent). Norway was one of the pioneers with VAT rules amended in 2011 and the digital tax rate set at 25 per cent, the highest globally, while New Zealand charges 15 per cent and Australia ten per cent.
Within Southeast Asia, Malaysia is the second country to introduce a digital tax after Singapore.
The Malaysian government will impose six per cent tax on foreign digital service providers, effective January 1, 2020, but made it clear that no additional tax will be collected for tangible products bought through online stores. The finance ministry defines digital services as “any service that is delivered or subscribed over the Internet or other electronic networks and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.” Examples of digital services include software, applications, video games, music, e-books and film streaming services, subscription-based media, database, hosting and cloud storage...
The Malaysian government will impose six per cent tax on foreign digital service providers, effective January 1, 2020, but made it clear that no additional tax will be collected for tangible products bought through online stores.
The finance ministry defines digital services as “any service that is delivered or subscribed over the Internet or other electronic networks and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.”
Examples of digital services include software, applications, video games, music, e-books and film streaming services, subscription-based media, database, hosting and cloud storage services, advertising on online platforms, Internet-based telecommunication, e-learning and e-training, as well as booking platforms, search engines and social networks, among others and as long as they are from abroad.
First and foremost, the tax will affect digital services provided by firms such as Google Play, Netflix, Spotify, Apple Store and the likes, as well as digital game distribution companies such as Steam, Amazon’s and Adobe’s cloud services, Dropbox, Facebook advertising and Airbnb bookings, and so on. However, there would be no impact on digital payment service providers such as Alipay or Grab Pay, the ministry noted.
Enabling a better competitive environment for local companies
In Malaysia, the broad intention of this service tax extension is to level the playing field for local service providers in the area of digital technology to fairly compete with foreign firms. This is a common theme among such global legislative amendments and implementations.
Still, the digital tax rate in Malaysia is low in comparison to other countries. For instance, Russia introduced a similar tax on digital services tax for foreign suppliers in 2017 at the then rate of 18 per cent (increased in January 2019 to 20 per cent). Norway was one of the pioneers with VAT rules amended in 2011 and the digital tax rate set at 25 per cent, the highest globally, while New Zealand charges 15 per cent and Australia ten per cent.
Within Southeast Asia, Malaysia is the second country to introduce a digital tax after Singapore.
