Service Tax on Digital Service (SToDS) / Digital Service Tax

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Service Tax on Digital Service (SToDS) / Digital Service Tax

As stated at the “Guide on: Digital Services” as issued by the Royal Malaysian Customs Department:

“Effective 1st January 2020, service tax shall be charged and levied on any digital service provided by a foreign registered person (FRP) to any consumer in Malaysia.”

This implementation comes into effect for digital advertising services such as Facebook Ads, Google Ads, Linked Ads in Malaysia.

What is Digital Services?

“Digital service” means any service that is delivered or subscribed over the internet or other electronic network and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.

 

Digital services include the supplies of the following (the list is not exhaustive):

Digital Services Example
Software, application & video games online licensing of software, updates and ad-ons website filters, firewalls, provision of mobile applications
Music, e-book and film provision of music, live streaming services, include subscription based media / membership
Advertisement and online platform offering online advertising space on intangible media platform, offering platform to trade products or services
Search engines and social networks customised search-engine services
Database and hosting website hosting, online data warehousing, file-sharing and cloud storage services
Internet Based Telecommunication Cloud-PABX, VOIP Phone
Online training Provision of distance teaching, e-learning, online courses, webinar

 

What is Foreign Service Provider (FSP)?

Foreign service provider means any person who is outside Malaysia providing any digital service to a consumer and includes any person who is outside Malaysia operating an online platform for buying and selling goods or providing services (whether or not such person provides any digital services) and who makes transactions for provision of digital services on behalf of any person.

FSP who provides digital services to consumers in Malaysia and the value of digital service for a period of twelve months or less exceeds the threshold of RM500,000 is required to be registered.

 

Who is the Consumer in Digital Service Tax?

“Consumer” means any person who fulfils any two of the following:

  • (a) Makes payment for digital services using credit or debit facility provided by any financial institution or company in Malaysia;
  • (b) Acquires digital services using an internet protocol address registered in Malaysia or an international mobile phone country code assigned to Malaysia;
  • (c) Resides in Malaysia.

 

Reference:

  1. Malaysia Customs Website on Digital Service Guide: Guide on: Digital Services
  2. Star Online: Google to Charge 6% Digital Tax in Malaysia Starting from Jan 1, 2020, Digital Tax Can Rake in RM2.4bil a Year

*Keep in mind that I’m unable to give tax advice. If you have any questions about the digital service taxes, I suggest contacting your tax advisors or tax authorities.

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