With one and a half months left before the new Service Tax on Digital Services kicks in starting Jan 1, 2020, Malaysians generally are still in the dark about what falls under this tax net. As popular platforms such as Spotify, Netflix and Steam have been named to be among the companies that will be slapped with the tax under the new tax fraction, the question is whether consumers need to bear the tax, or it will be absorbed by the providers, or passed on to them (consumers).
The Royal Malaysian Customs Department (RMCD) has published a guideline, ironing out what falls under the digital tax scope. “Service tax shall be charged and levied on any digital service provided by a foreign-registered person (FRP) to any consumer in Malaysia. Digital service has the meaning assigned to it under Section 2 of the Service Tax Act 2018 (STA).
Executive Director for Indirect Tax Practice at KPMG Tax Services, Ng Sue Lynn explained the list that showed the breakdown of the tax collection framework.
"It is important to note that the 6.0 per cent service tax is on services and not on goods. Hence, the amount is not as significant as many thought it to be. However, the challenge is when the element of services are embedded into the price of the goods," she added.
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