Malaysia e-services service tax

In 2019, Malaysia extended service tax on electronic services for consumers to non-resident providers/marketplaces starting 1 January 2020. Malaysia also included goods provided by foreign online sellers in the same measure. Service Tax was introduced in 2018/

The Malaysian Royal Malaysian Customs Department has indicated that B2B services are also liable to the tax when provided by non-resident providers. In this case, the recipient would be exempted from applying the reverse charge to prevent double taxation.

What is Malaysian e-services?

Malaysia uses a very broad definition for what constitutes digital services. It considers any service delivered via the internet or other electronic network. It further requires that the service may not otherwise by accessed and delivered without automated IT. Since Malaysia has not provided a prescriptive list of services, it is assumed to include income from the following list:

  • Streaming or downloads of media
  • Membership to online sites and clubs
  • E-books and audio books
  • Apps
  • Software
  • Cloud services, including memory
  • Online gambling
  • E-learning, excluding online access to live tutorials
  • Advertising services

Determining if service tax is due

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

B2B supplies by non-resident providers of e-services are also liable to service tax.

Service tax registration threshold

There is a service tax registration threshold for non-resident providers of RM500,000 per annum. Providers may register online.

Providers are required to produce invoices, or at least documents with basic prescribed transactions details, for each transaction.  Once registered, taxpayers must submit quarterly returns listing income and service tax due. This is due by the final day of the month after the filing period.