What is Withholding Tax?
Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and paid to the Inland Revenue Board of Malaysia.
‘Payer’ refers to an individual/body other than individual carrying on a business in Malaysia. He is required to withhold tax on payments for services rendered/technical advice/rental or other payments made under any agreement for the use of any moveable property and paid to a non-resident payee.
‘Payee’ refers to a non-resident individual/body other than the individual in Malaysia who receives the above payments.
What is Service Tax on Imported Services?
With effect from 1 January 2019, Perkhidmatan Bercukai Diimport (PBD) is subject to service tax.
Any individual who operates a business in Malaysia (including in Kawasan Ditetapkan (KD) and Kawasan Khas (KK)) and obtains taxable services from overseas service providers must pay service tax.
The terms ‘any individual’ refers to all registered and unregistered businesses under the Service Tax Act 2018.
Perkhidmatan Bercukai Diimport (PBD) refers to taxable services under [Schedule One], Service Tax Act 2018. Overseas service providers are entities that provide services in terms of merchandise, land, or others related to Malaysia or for the people residing in Malaysia.
How do the Withholding Tax and Service Tax on Imported Services affecting the Media Spend Budget?
Please note that our digital advertisement (Google, Facebook and LinkedIn) budget for media spending needs to curve out 14% for taxes compliance, with immediate effect (ie 1 Feb 2019).
Initial allocated RM10,000/month for media spending;
Revised allocation is RM8,772/month for media spending.
All related to Google, Facebook and LinkedIn.
1. Withholding tax: In general, all payment to the overseas supplier is required to withhold 10%. However, for payment to Singapore (Google) and Facebook (Ireland) is 8%, as Malaysia has a Double Taxation Agreement (DTA) with the respective countries.
2. Service Tax on Imported Services: Individual or company who acquire imported services from an overseas company is subject to service tax at 6%.
Total 14% additional taxes on our media spending to Google, Facebook and LinkedIn.
For further information, please click the links below:
Link for Publication on Taxes Guidance:
(i) Guidance on Payment Types subjects to Withholding Tax form IRB website: http://www.hasil.gov.my/bt_goindex.php?bt_kump=2&bt_skum=6&bt_posi=1&bt_unit=5&bt_sequ=1&bt_lgv=2
(ii) Guidance on Tax Treatment on Digital Advertising from IRB website: http://lampiran1.hasil.gov.my/pdf/pdfam/PN_NO_1_2018.pdf
(iii) Double taxation Agreement from IRB website: http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=5&bt_posi=4&bt_unit=1&bt_sequ=1&bt_lgv=2
(iv) Guidance on Imported Services from SST Custom Website: https://mysst.customs.gov.my/assets/document/Industry%20Guides/GI/Panduan%20Perkhidmatan%20Bercukai%20Diimport.pdf
Please download the Excel sheet below for an example of pre and post changes on taxes: Download now!