Digital Tax, is it new?

The new 6% charge set to be forced from Jan 1, 2020 on foreign digital service providers will be paid by the consumers

The foreign providers will bill their clients the tax and pass the collection to the government, in the same way local businesses collect the service tax from customers on behalf of the government, they said in which make it stand out the same as the current Malaysia SST tax mechanism works. 

What is needed to be understood is that the six-per cent rate is not necessarily on the total purchases, but on the service charged by the technology companies in providing the services to Malaysians.

Below is the list of services that the Royal Malaysian Customs Department (RMCD) has indicated would fall under the tax net. The list is not exhaustive.

(i) Software, applications and video games (e.g. online licensing of software, updates and ad-ons website filters, firewalls, and provision of mobile applications);

(ii) Music, e-book and films (e.g. provision of music, live streaming services, including subscription-based media / membership);

(iii) Advertisement and online platforms (e.g. offering online advertising space on intangible media platform, and offering platform to trade products or services);

(iv) Search engines and social networks (e.g. customised search-engine services);

(v) Database and hosting (e.g. website hosting, online data warehousing, file-sharing and cloud storage services);

(vi) Internet-Based Telecommunication (e.g. Cloud-PABX and VOIP Phone);

(vii) Online training (e.g. provision of distance teaching, e-learning, online courses, and webinar), and;

(viii) Others (e.g. Subscription of online newspapers and journals, provision of other digital content like images, text, and information and payment processing services).

From the listed services, the government is eyeing to increase tax revenue by RM2.4 billion a year, and the RMCD has opened the registration of foreign service providers (FSP) since Oct 1, 2019.

So now we know how it works, in a brief.

Are we alone in this?

 Not exactly, and here is why; In Asia alone, Taiwan, Japan, Bangladesh, and even South Korea have all impose digital tax with fluctuating rates. So far Malaysia is the second most reduced at 6%, the least being 5% in Taiwan.

So, does it really helps? We will only able to find out after year 2020, till then, ready to fork out those extra 6%! All the best, fellow Marketers!