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Malaysia Sales Tax on Foreign Digital Services

Malaysia imposed its Service Tax on foreign-provided digital services from 1 January 2020. This includes providers and electronic platforms. There is a RM 500,000 Sales Tax registration threshold. Non-residents must charge this to both B2C and B2B transactions. There is no requirement to appoint a Fiscal Representative.

The current Service Tax rate in Malaysia on digital services is 6%. There is also a standard 10% Sales Tax on most other transactions. SST (Sales and Services Taxes) replaced the short-lived 6% Goods and Services Tax on 1 September 2018.

Singapore VAT on digital services was introduced at the same time. Follow VAT Calc’s global VAT and GST on digital services tracker for live updates on worldwide reforms.

What digital services are subject to Malaysia Service Tax?

Services Tax on Digital Services (STODS) is imposed on income from the following supplies provided by the internet or similar electronic network:

  • Software, application and video games
  • Music, e-book and films
  • Online advertising
  • Search engine and social networks
  • Database on hosting
  • Internet-based telecoms
  • E-learning
  • Certain newspapers and journals
  • Payment processing services
  • Images and text

Determining if Malaysia Service Tax is due

Malaysia, like most countries, has adopted the destination principle to determine the place of supply and which country any indirect tax is due in. This means any provider or marketplace must establish if their customer is resident or ‘enjoys the benefit’ of the digital service in Malaysia. Providers may rely on the following information to evidence this:

  • Bank or credit card address used for the payment
  • Billing address of the customer
  • IP address of the device used to access the services
  • Telephone dialling code

SST registration and compliance

Once over the STODS registration threshold, providers or marketplaces may register online with the Royal Malaysian Customs Department Internal Tax Division. There is no requirement to appoint a Fiscal Representative.

Once registered, SST or STODS returns are due on a bi-monthly basis. The filing should be submitted by the last day of the month following the reporting period end.

Electronic marketplace SST obligations

In addition to providers selling digital services directly to Malaysian consumers, electronic platforms may be liable for the VAT obligations instead of their third-party providers on their marketplaces. Platform operators face the same obligations, including the STODS registration threshold.

VAT Calc’s in real-time global Calculator and Auditor  services produce instant digital services tax calculations into your ERP, billing, e-commerce or e-invoicing systems.

Asia Pacific VAT on digital services

Comments (click for details) Rate Date Threshold Comments
Australia 10% Jul 2017 AUD $75,000
Azerbaijan 12% Jan 2017
Armenia 20% Jan 2022 AMD 115million
Bangladesh 5% - 15% Jul 2019 B2B and B2C
Bhutan 7% Jul 2021 Nu 5million
Cambodia 10% Mar 2022 KHR 250m
China 6%-13% N/a Nil Withholding VAT; B2B and B2C
Fiji 9% TBC FJD 300,000
India 18% Jul 2017 -
Indonesia 11% Aug 2020 IDR600m or 12k customers
Japan 10% Oct 2015 JPY 10 million
Kazakhstan 12% Jan 2022 Nil
Kyrgyzstan 12% Jan 2022 Nil
Laos 7% Feb 2022 LAK 400m
Malaysia 6% Jan 2020 RM500,000
Nepal 13% Jul 2022 Rupees 2m Also 2% DST
New Zealand 15% Oct 2016 NZD 60,000
Pakistan 2% Sep 2021 Nil Marketplace Withholding VAT
Philippines 12% TBC P 3million
Singapore 7% Jan 2020 S$ 100,000
South Korea 10% Jul 2015 Nil
Taiwan 5% May 2017 NTD 480,000
Tajikistan 18% Jan 2021
Thailand 7% Sep 2021 1.8m Baht
Uzbekistan 15% Jan 2020 Nil
Vietnam 10% Dec 2020

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