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.
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
- 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.
Asia Pacific VAT on digital services
|Comments (click for details)||Rate||Date||Threshold||Comments|
|Australia||10%||Jul 2017||AUD $75,000|
|Armenia||20%||Jan 2022||AMD 115million|
|Bangladesh||5% - 15%||Jul 2019||–||B2B and B2C|
|Bhutan||7%||Jul 2021||Nu 5million|
|Cambodia||10%||Mar 2022||KHR 250m|
|China||6%-13%||N/a||Nil||Withholding VAT; B2B and B2C|
|Indonesia||11%||Aug 2020||IDR600m or 12k customers|
|Japan||10%||Oct 2015||JPY 10 million|
|Laos||7%||Feb 2022||LAK 400m|
|Nepal||13%||Jul 2022||Rupees 2m||Also 2% DST|
|New Zealand||15%||Oct 2016||NZD 60,000|
|Pakistan||2%||Sep 2021||Nil||Marketplace Withholding VAT|
|Singapore||7%||Jan 2020||S$ 100,000|
|South Korea||10%||Jul 2015||Nil|
|Taiwan||5%||May 2017||NTD 480,000|
|Thailand||7%||Sep 2021||1.8m Baht|