Netflix, iflix to be taxed under GST amendments


Digital streaming companies such as Netflix and iflix will be taxed under the amendments to the Goods and Services Tax (GST) Act, said Royal Malaysian Customs Department DG Datuk Seri Subromaniam Tholasy.

“Yes, yes, definitely,” he said when asked whether streaming services such as iflix and Netflix will be included in the amendments of the act.

There are estimated 66,000 active streaming subscribers for Netflix in Malaysia and it is forecast that the number will reach up to 336,000 by year 2020.

The provider of Subscription Video on Demand (SVoD) service for emerging markets, iflix meanwhile, had 1.5 million subscribers in Malaysia, Thailand and the Philippines as of 2016. The service is available in 10 markets across Asia with a recent launch in Cambodia.

Subromaniam maintained that the department is expecting an additional “few billions” in taxes once they tap into the digital economy. He stressed that GST is needed for the country, as the former Sales and Services Tax (SST) cannot tap into the digital economy. “If we go back to SST, we will lose a huge source of revenue, everything will be digital and we cannot tax anything.

“So, let’s be professional when it comes to taxing issues,” he said in a press conference in Shah Alam yesterday.

Last month, Subromaniam said Customs plans to amend the GST Act to enable the government to collect taxes from foreign companies operating in Malaysia, particularly in the digital economy bracket.

The department, he said, aims to propose the amendments when the Dewan Rakyat reconvenes later this month.

The GST only applies to businesses with “business establishment” or “fixed establishment” in the country, while those operating outside of Malaysia are not subject to the tax.

The implementation of the digital tax may mean that foreign service providers serving Malaysian consumers may face taxation.

According to the Malaysia Digital Economy Corp (MDEC), Malaysia has 20.62 million active Internet users in 2016.

Meanwhile, Customs will also place “GST ambassadors” around the Klang Valley to aid businesses with their GST payments.

“The placement will start on Oct 15 and end on Dec 31.We will then evaluate on its effectiveness. This move is made under the departments informed compliance policy,” he said.

The exercise is expected to rake in an additional RM1 billion worth of revenue.

Subromaniam explained it is the department’s attempt to collect the tax properly without having to conduct a nationwide crackdown.

“Earlier this year, we issued 62,000 notices on poorly filed tax declarations. We told them nicely to make amendments and declare again. As of yesterday, however, less than 10,000 of that number made the necessary amendments,” he said.

“We do not want to do crack-down, but those who are stubborn — better watch out!” he warned.