Malaysia passes bill to tax foreign-supplied digital services

An April sitting of the Malaysian government has passed a new bill imposing a tax of 6% on supplies from foreign digital service providers. Malaysia is the second country in SE Asia to introduce a digital tax, after Singapore.

Apr 9, 2019

Malaysia has passed a government bill amending its service tax rules to bring foreign suppliers of digital services into the scope of the rules. The move means Malaysia (pending official approval) will introduce the 6% tax on January 1, 2020, the same time that its neighbour Singapore introduces a similar tax. 

Malaysia's Deputy Finance Minister Datuk Amiruddin Hamzah was quoted as referencing other similar legislative implementations across the globe when announcing the plan. 

He was quoted by the Malay Mail stating the 6% rate was deemed to be one of the lowest in the world compared to that imposed in several other countries.

“They (digital service providers) should have no problem to pay...because it’s only six per cent. If they can comply with Russia, Norway and New Zealand, I don’t see any reason why they should refuse to comply with the rate in Malaysia,” he said.

For context Russia introduced a similar tax on digital supplies by foreign suppliers back in January 1, 2017, at the rate of 18%. Norway was one of the pioneers of such a tax with their VAT rules amended back in July 1, 2011, at the rate of 25%, while New Zealand extended its Goods and Services Tax (GST) regime on October 1, 2016, at the rate of 15%.

Here at Taxamo we will, of course, keep you updated with any further developments in Malaysia and beyond.

Malaysia and Singapore make digital tax moves

Malaysia is the second Southeast Asian state, after Singapore, to plan such an extension of its tax rules to cover digital supplies by foreign suppliers. Both tax jurisdictions are now on track to introduce the new rules at the same time.

This extension of Malaysia's service tax is similar to Singapore's Goods and Services Tax (GST) that is also to be extended on January 1, 2020. More on Singapore's plans here.

In Malaysia, the intention of the service tax extension is to level the playing field for local service providers in the area of digital technology to fairly compete with foreign firms. A common theme among such legislative amendments and implementations.

READ MORE: More context on Malaysia's digital taxation plans (and background) here. 

Taxamo content is created for guidance only, please consult your local tax advisor.

◀ See more insights

Next Steps

Our practical approach to VAT/GST compliance

Benefits that meet your unique business needs

Flexible integration options