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Malaysia: Service tax and digital services

Malaysia: Service tax and digital services

The Ministry of Finance in late 2019 issued a release concerning service tax and the implications of the tax on imported services, including digital services.

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In general, businesses have been required to self-account for service tax imposed on imported taxable services at a rate of 6%.  Effective 1 January 2020, digital services provided by foreign service providers (registered) are also subject to the 6% service tax. 

The guidance addresses the potential cascading effect of the services tax and price hike issues, including:

  • “Group relief” is extended to qualifying imported taxable services acquired from foreign service providers within the same group of companies
  • Businesses are exempted from accounting for service tax on imported professional services and advertising services, provided such imported services are the same as the services provided by the recipient company
  • Local service providers that have paid service tax to foreign service providers on digital services may make a claim for refund from the Royal Malaysian Customs Department
  • Distance-learning services for preschool, primary and secondary education and tertiary education (including vocational and professional training provided online), whether by local or overseas service providers are not categorized as a taxable service and not subject to service tax
  • Online services including e-newspaper and reading materials relating to educational, technical, scientific, historical or cultural journal or periodical are not categorized as a taxable service and are not subject to service tax


Read a 2020 report prepared by the KPMG member firm in Malaysia

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