Notice for Malaysian Service Tax (SST) on Imported Digital Services is something Malaysia customers is fully aware for the government in the progress of implementing it. Malaysia government make the change again after GST to SST, then SST rev and now effective 1-Jan-2020 onward for the Malaysian Service Tax (SST) on Imported Digital Services.
List of services that could be regarded as digital services:
(a) online licensing of software, updates and add-ons website filters and firewalls; (E-SPIN remark: cloud based or online based license subscription)
(b) mobile applications and video games;
(c) provision of digital content, for e.g., music, e-book, film, images, text and information;
(d) advertisement platform, for e.g., provision of online advertising space on intangible media platform;
(e) online platform, for e.g., offering of a platform to trade products or services;
(f) search engines services;
(g) social networks;
(h) database and hosting, e.g., website hosting, online data warehousing, filesharing and cloud storage services;
(i) internet-based telecommunication;
(j) online training, for e.g., provision of distance teaching, e-learning, online courses and webinars;
(k) online newspapers and journals subscription; and
(l) payment processing services.
To address the potential double taxation issue on the same service in light of the requirement on Malaysian businesses to reverse charge on imported taxable services, there will be an exemption granted to Malaysian businesses from the obligation to reverse charge, if such business have already been charged with service tax during earlier SST rev. , ie product that already charge once will not be charged twice.
This means that businesses who are required to reverse charge for services which fall under the imported taxable services regime, will not be required to do so, if it has already been charged service tax by a FSP under the service tax for imported digital services regime.
For the Malaysia customer and E-SPIN business with Malaysia customer in concern, for oversea developed software licensing product it already inclusive of the 6% imported service tax, which cover also cloud based license for the Malaysia Custom SST tax compliance requirement, so all the price will not be double tax until further or future change again for regulation in concern.
But since the new DST in effect from 1-Jan-2020, the E-SPIN Sdn Bhd (who are registered and charge service tax, collect on behalf of Custom) will continue to use tax column to split the item that require to charge 6% SST for local services, such as training, installation, consultancy, local maintenance support and other professional services AND oversea software (from on premise perpetual license, license subscription, oversea online, cloud, streaming to online services). In this way, all customers and partners will always know, actually local governments want to see the tax column with the portion of the tax collected for more transparent tax compliance and avoid customers being double or triple tax charged.
E-SPIN will monitoring closely for any further changes as closely as possible, please note that the above notice is only impact for Malaysia customer who are right now trade with E-SPIN Sdn Bhd, effectively 1-Jan-2020.
Feel free to contact E-SPIN for the change notice (if any).
Last checked and updated 2-Jan-2020