Malaysia sales and service tax on e-services

Malaysia’s sales and service tax (SST) is an indirect tax imposed on goods and services at the provider level. SST was re-introduced in Malaysia on September 1, 2018, to replace the 6% Goods and Services Tax (GST).

Malaysian SST consists of two components — sales tax and service tax. Sales tax is levied on goods either manufactured in or imported into Malaysia. Service tax is levied on taxable services provided by registered businesses in Malaysia.

In 2020, SST was extended to cover digital services (e-services) supplied by foreign businesses to consumers in Malaysia. This applies to services and provisions such as software, apps, games, music, e-books, films, platforms, social networks, advertisement services, online training, online newspapers, journals and periodicals, and payment processing services.

Foreign businesses providing digital services in Malaysia must register with the Royal Malaysian Customs Department (RMCD) if the value of services rendered exceeds the threshold of MYR 500,000 over a period of 12 months.

Digital service providers must charge SST on both B2B and B2C transactions.

The foreign provider of digital services is obliged to track and determine that their consumer is located in Malaysia.

The Malaysian tax authorities require any two of the following conditions of the consumer to be met to trigger the tax:

1. Resident of Malaysia

2. Uses credit card issued by Malaysian payment provider

3. IP address registered in Malaysia