Bill passed to tax digital businesses


The government will impose a 6% service tax on digital businesses beginning Jan 1, 2020, with the Service Tax (Amendment) Act 2019 passed in the Dewan Rakyat yesterday.

The approval came after the third reading of the five amendment bills to tax digital business and make Pangkor duty-free, among others, won a majority vote.

The bills — namely the Service Tax (Amendment) Bill 2019, Customs (Amendment) Bill 2019, Excise (Amendment) Bill 2019, Sales Tax (Amendment) Bill 2019, and the Free Zones (Amendment) Bill 2019 — were passed without much fuss.

Deputy Finance Minister Datuk Amiruddin Hamzah said the government is looking at a digital tax of 6% starting Jan 1, 2020, with a maximum threshold of RM500,000.

“The tax shall be imposed and levied at a fixed rate based on the value imposed by the foreign providers, which should also be registered with the Royal Malaysian Customs, Department” he told the Dewan Rakyat when winding up debates on the Service Tax (Amendment) Bill yesterday.

The Service Tax (Amendment) Bill 2019 will enable the government to impose service tax on digital and online services rendered by foreign providers to local consumers.

Digital tax will be applied on services such as video and music streaming like Netflix or Spotify, and applications with subscription fees and listing fees on electronic marketplaces such as Apple’s or Google’s app stores.

Supporting the implementation of digital tax, Abdul Rahman Mohamad (Lipis-Barisan Nasional) said the global digital businesses such as Netflix and even online shopping sites are only subjected to tax imposed by the country they are residing in.

“It is a huge loss for us as we do not charge them such taxes, and taking this into account, the sector is actually worth billions of ringgit,” he said during the debate session yesterday.

Amiruddin said the government will have to work with other governments abroad to take action against foreign companies that do not oblige to the digital tax.

“We are expecting a government-to-government collaboration for a better implementation of this tax.

“Other countries impose much higher digital taxes, such as Norway (25%), Australia (10%), Rusia (18%) and New Zealand (15%), so I don’t think 6% should be a problem” he added.