Bills to tax digital biz, pass Pangkor as duty-free tabled

Four more bills also tabled for 1st reading, all aimed at granting duty-free status on Pangkor Island

by ALIFAH ZAINUDDIN & DASHVEENJIT KAUR / pic by ISMAIL CHE RUS

The government can levy service tax on digital businesses soon as amendments to the Service Tax (Amendment) Act 2019 was tabled in Dewan Rakyat yesterday.

The bill, tabled by Finance Minister Lim Guan Eng (picture) for first reading, is to charge and levy service tax on any digital service provided by a foreign registered person to any consumer.

“The act and it’s subsidiary legislation is applicable to any person, of whatever nationality or citizenship, beyond the geographical limits and the territorial waters of Malaysia, if the person is a foreign service provider or is registered under section 56c as a foreign registered person,” the bill read.

The bill proposes for any foreign registered person who contravenes to be fined up to RM50,000 and/or imprisonment for a term of up to three years.

In Subsection 2(1e) of the Service Tax (Amendment) Bill, “foreign service provider” means any person who is outside of 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 service).

In Subsection 2(1f), “digital service” means any service that is delivered or subscribed over the Internet and other electronic network and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.

Meanwhile, four more bills — Customs (Amendment) 2019, Excise (Amendment) 2019, Free Zones (Amendment) 2019 and Sales Tax (Amendment) 2019 — were tabled for first reading, all aimed at granting duty-free status on Pangkor Island.

All five bills are expected to be tabled for second and third readings in the current Dewan Rakyat session ending next week.

The duty-free status on Pangkor was in line with the government’s announcement during Budget 2019.

The Customs Act (Amendment) 2019 bill seeks the exclusion of Pangkor from the principal customs area, and for special provisions dealing with Pangkor as a duty-free island whereas the Free Zone (Amendment) 2019 bill also seeks to introduce a new definition of “Pangkor”.

Under Section 163Q of the Customs Act 1967, “Pangkor” means Pangkor Island, Mentagor Island, Giam Island, Simpang Island, Tukun Terindak Island, Pelanduk Island, Anak Pelanduk Island, Landak Island, Batu Orang Tua and Batu Jambal.

In the similar bill under the special provisions dealing with Pangkor, “principal customs area” means Labuan, Langkawi, Tioman dan Pangkor.

For the customs duties relating to Pangkor, the bill proposes that no import or export duty shall be payable upon any goods imported or exported into Pangkor, other than goods which the finance minister may from time to time declare by order.