Foreign companies operating digital services like Netflix and Spotify will soon have to pay a 6% tax to the Malaysian government after the passage of the Service Tax (Amendment) Bill 2019 today
The 6% tax, which will come into force from 1 January 2020 onwards, applies to any and all digital services provided by foreign companies regardless of whether they are for individual or business use
"Examples of digital services include online music and online subscriptions, e-book subscriptions, e-marketplace platform usage, cloud computing-based subscription, and online computer software purchases," said Deputy Finance Minister Datuk Amiruddin Hamzah, as quoted by Astro Awani.
"Malaysian users are determined based on the payment method, the Internet Protocol (IP) address or the mobile number used during the purchase or subscription of digital services, and whether the user lives in Malaysia," he explained.
The digital tax was announced in the tabling of Budget 2019 last year, although the tax rate was not revealed at the time
According to Finance Minister Lim Guan Eng, the service tax will be imposed on "online services imported by users" such as Netflix, Spotify, Steam, as well as other software, music, videos, or any digital advertising.
Foreign service providers will also be required to register with Malaysia Customs.