No rate increase yet for some digital providers

Some companies have yet to announce whether they will absorb the tax


SOME foreign digital service providers, including Spotify Technology SA and Airbnb Inc, have yet to impose the 6% digital tax to users, although entertainment streaming giant Netflix recently announced a RM4 increase for its service.

Netflix revised the price of its Basic plan from RM33 to RM35, Standard from RM42 to RM45 and Premium from RM51 to RM55 starting Jan 9, 2020. The price of its mobile-only subscription plan will remain at RM17 a month.

This is the first time Netflix has increased the price of its plans since the service was introduced in Malaysia in January 2016.

Other companies have yet to announce whether they will absorb the tax as they are still studying the matter.

Checks by The Malaysian Reserve (TMR) online showed that there were subscribers who had queried Spotify Malaysia and Airbnb to get more information regarding the new charges.

However, according to Spotify’s customer service, @SpotifyCares on Twitter, the firm does not have any information about it for the time being, but they will be sure to pass along a feedback.

According to @AirbnbHelp Twitter account, the service tax is applicable instead of the Goods and Services Tax or Value-Added Tax in Malaysia.

“Malaysian service tax applies on service fees for guests and hosts in Malaysia. If you are a guest, a service tax is charged at the time of payment and is based on the total guest service fee for a reservation and if a host, service tax is deducted from your payout and is based on the total host service fee for a reservation (unless otherwise exempt).

“As of this moment, we do not have information on increase in rates just yet,” it said.

The digital tax was announced during Budget 2019, which outlined that a 6% service tax would be imposed on foreign digital services, including software, music, video and digital advertising effective Jan 1, 2020.

A Customs Department spokesman said at least 126 foreign digital service providers had registered for the tax in Malaysia as of Dec 20, 2019. They include Netflix, Spotify, Google and Airbnb, he said.

Google Malaysia recently said a 6% digital tax would take effect on its G-suite services. Malaysians buying apps or making in-app purchases from the Google Play store will be charged a 6% digital tax as well.

Facebook Inc also said it would be charging the 6% digital tax for its advertisements in Malaysia, while PlayStation Store said it would apply the tax on purchasable items and subscriptions on their platform.

Dr Veerinderjeet Singh, chairman of the Axcelasia Group, said there is no delay as the law is already effective, but there could be some foreign service providers who may still be discussing details with the Customs Department.

“The service tax applies only to local service providers who are operating in Malaysia. Now, the service tax has been widened to be imposed on foreign service providers who are providing such services to Malaysians. So, that is all that has happened. As such, some additional service tax revenue will be earned by the Customs Department,” he told TMR.

Tax revenue could increase by more than RM2.4 billion a year should foreign digital service providers register for the 6% service tax.