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Spotlight on Digital Services TaxApr-24-2019

Insight from the IBFD Asia-Pacific Team
 
On 8 April 2019, Malaysia passed a bill introducing a service tax on digital services, which will come into effect on 1 January 2020.  Foreign digital service providers with an annual turnover of over MYR 500,000 are required to register with the Malaysian Customs Department and will be subject to a 6% indirect tax on the services provided to a Malaysian resident and consumed in Malaysia.

 

Malaysia joins a growing list of countries that have introduced (or propose to introduce) a tax on digital services.  Within the Asia-Pacific region, Australia, India, Japan, New Zealand, South Korea and Taiwan have already done so, with Singapore also implementing its service tax on the same date as Malaysia. Noticeably absent are the major economies of China and Indonesia.  However, given the current concern over tax leakages stemming from digital services, it is likely to be just a matter of time.