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May 8, 2019
Malaysia introduces digital service tax
On 8 April 2019, the Dewan Rakyat (the lower House of Malaysia’s Parliament) approved the legislation (the Bill) on the digital service tax (DST) introduced in the 2019 Budget.1 The Bill is currently being tabled at the Senate.
This Alert summarizes the key aspects of the Bill.
Any foreign service provider providing digital services to consumers on or after 1 January 2020 is required to charge a 6% service tax on the digital services.
The key terms defined in the Bill are as follows:
Based on the Frequently Asked Questions (FAQs) for DST released by the Royal Malaysian Customs Department (Customs) on 18 April 2019, the service tax registration threshold is RM500,000 (US$ 122,000) and the application for registration will be processed online.
Any foreign service provider who provides digital services prior to 1 January 2020 and is liable to be registered should begin applying for service tax registration on 1 October 2019. The registration will be effective from 1 January 2020 or any later date as determined by Customs.
As a service tax registered person, the foreign service provider will be required to file quarterly returns and pay the service tax due, not later than the last day of the month following the end of the quarterly taxable period to which the return relates.
1. See EY Global Tax Alert, Malaysia releases 2019 Budget, dated 4 December 2018.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Tax Consultants Sdn Bhd, Kuala Lumpur
Ernst & Young LLP (United States), Malaysia Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York