Online shopping sites among digital services to be taxed under Malaysian government’s new plan

By Aina Nasa

Foreign digital service providers will soon be taxed for their services in Malaysia as authorities look to amend several tax laws.

Customs Department director-general Datuk T. Subromaniam said they were currently in talks with the Finance Ministry’s tax unit to tax these service providers to level the playing field between foreign and local digital economy players.

In terms of imposing the Goods and Services Tax (GST) on them, Subromaniam said it was a requirement to have a place of supply, which digital service providers do not have, thus the lack of tax imposed.

“Foreign digital service providers receive direct payment for their services but they are not taxed.

“Once provisions are amended, we have a legal basis to tax them,” he said at the GST Conference 2017 here today.

He added that the process of amending several tax laws would kick off during the next Dewan Rakyat sitting in October.

Taxing foreign digital service providers, he added, could boost the country’s revenue in the future as the government was targeting additional collection of a few billions ringgit from the digital economy.

On examples of foreign service providers to be taxed, he said those who sold software and online shopping sites like Lazada and alibaba.com will likely be required to adhere to relevant tax requirements soon.

Alibaba group is the owner of the South China Morning Post.

Speaking on GST, Subromaniam said the government was currently on track to collect at least RM42 billion (US$10 billion) this year, RM1 billion (US$240 million) than last year’s collection.

“GST is becoming increasingly important to the country’s economy.

“Collection has shown improvement parallel with the country’s GDP (gross domestic product) growth.”

He added that there were still some leakages in terms of businesses not registered, but since its implementation in April 2015, 453,000 businesses had registered to pay GST.

In comparison with Sales and Services Tax, he said, only 60,000 businesses were registered.

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