The taxman takes aim at online businesses

Online businesses to be taxed according to existing taxable thresholds


THE Inland Revenue Board (IRB) said it has begun monitoring Malaysian online businesses as part of preparations to tax all companies that make profit on the Internet.

IRB CEO Datuk Sabin Samitah (picture) said the tax net includes businesses that use social media like Facebook and Instagram to sell products.

Online businesses will be taxed according to existing taxable thresholds for industries and international standards, he told The Malaysian Reserve.

Companies that do not make profit above the threshold will not be affected.

“We have actually started the (process) to tax all sorts of online businesses,” he said.

Sabin said the IRB has set up a special e-commerce division to monitor businesses that are not registered with the agency and will use specialised audit tools to capture business information from the social media.

He said the IRB will also monitor asset acquisitions by people running online businesses to determine their income.

“The moment they start purchasing property, or have substantial money in the bank, we can trace them,” Sabin said.

He said companies may seek normal refunds or exemptions if they feel that rising business costs are impacting their profits.

“Tax has nothing to do with them suffering, because if the cost increases they can claim the cost of doing business.

“We will only tax the net profit. If you are not making any profit, there is no tax to be paid,” he said.

Sabin said the IRB is also preparing to tax international businesses with presence in the country, but will first conduct a detailed study with the Ministry of Finance on how it can be done.

“This is an international issue. The OECD has given a time frame up to 2020 to resolve digital economy issues,” he said, referring to the Organisation for Economic Cooperation and Development (OECD).

Members of the OECD include the US, UK, Japan, Canada and European countries.

Sabin said imposing tax on companies such as Uber Technologies Inc, Google Inc and Airbnb Inc would also require a closer look at international laws.

Second Finance Minister Datuk Seri Johari Abdul Ghani said in June that the government face barriers to taxing digital business platforms, because they are based outside of Malaysia.

He had said that the IRB met stumbling blocks during the implementation of tax structure on the online platform providers.

Most digital business platforms generate billions of ringgit in revenue from the country, but do not pay taxes as there is no specified tax structure for them.

“These platform providers are being hosted outside our jurisdiction and they may not be present physically in our country.

“Hence, our tax law may not be applicable to them,” Johari had said.