07 August 2019 Malaysia enacts law to impose service tax on digital services Malaysia's Service Tax (Amendment) Act 2019 (the Act) that implements the imposition of 6% service tax on certain digital services was enacted on 9 July 2019. The key features of the Act are in line with the draft bill presented on 8 April 2019.1 Any foreign service provider providing digital services, as defined below, to consumers on or after 1 January 2020 is required to charge a 6% service tax on the digital services.
Based on an 18 April 2019 a Frequently Asked Questions released by the Royal Malaysian Customs Department (Customs) on the topic, a foreign service provider will need to register for service tax if the total value of the digital services provided to consumers (defined above) exceeds RM500,000 (US$121,500) over any 12-month period. Online registration facilities are available. Any foreign service provider who provides the digital services prior to 1 January 2020 and is required to be registered should begin applying for service tax registration from 1 October 2019. The registration will be effective as of 1 January 2020 or any later date as determined by Customs. The foreign service provider will be required to file quarterly returns and pay the service tax due. Although initially expected to apply only on digital services provided to individual consumers, the law is unclear on this point. The term "consumer" is broadly defined and can be interpreted to include businesses recipients. Further details are expected to be released as a Customs Guide in due course. 1 See EY Indirect Tax Alert, Malaysia introduces digital service tax, dated 8 May 2019.
Document ID: 2019-1432 |
