Govt to collect RM300m of digital tax this year

Based on DoSM survey, the 6% tax rate can potentially yield about RM2.4b in digital tax revenue

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THE government is expected to collect RM300 million in 2020 from the 6% tax on digital services by foreign providers, which came into effect on Jan 1 this year.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said in a written parliamentary reply last week that as of July 31, a total of 248 foreign service providers registered for the tax. Some of the providers included established names such as Netflix Inc, Spotify AB, Google LLC and Airbnb Inc.

“The government estimates that the total revenue tax on digital services for 2020 is RM300 million,” he said, responding to Senator Datuk Kesavadas A Achyuthan Nair’s query if there was any hindrance in implementing the tax so far and on the amount the government was looking to collect within the first year of the tax’s execution.

Tengku Zafrul said Putrajaya has provided some special treatment on the importation of taxable services and digital services to ensure that that service tax can be implemented smoothly.

They include group relief facilities for business-to-business groups on the importation of eligible taxable services from service providers that are companies from the same group located abroad.

Local service providers are also exempted from factoring in and paying for service tax using the self-recipient accounting method on the importation of taxable services to avoid double taxation.

He said local service providers under the business-to-consumer group could make refund claims from the Customs Department if they have made any service tax payments to foreign service providers based on the actual amount of service tax paid.

Additionally, the Customs Department has provided a guide for foreign service providers (FSPs) that contains frequently asked questions which can be accessed on the Malaysia Sales and Sales Tax portal to assist FSPs in understanding and implementing the service tax on digital services.

Initial estimates suggest that the 6% tax rate can potentially yield about RM2.4 billion in digital tax revenue based on the Department of Statistics Malaysia’s (DoSM) survey on Malaysia’s RM398 billion e-commerce income in 2015.

On Tuesday, Deputy Communications and Multimedia Minister Datuk Zahidi Zainul Abidin said the government will consider imposing an additional charge of 20 sen for purchases between RM200 and RM1,000 made via e-commerce platforms such as Lazada and Shopee, as reported by Bernama.

He said there will be no additional charge on purchases below RM200, while an additional 20 sen will be charged for the next RM1,000 purchase. The fee is to raise a fund to assist the B40 (bottom 40% income) group by improving communications infrastructure in rural areas.

Federal Territories Minister Tan Sri Annuar Musa, however, objected to the proposal on Twitter, saying the matter has not been referred to the Cabinet.