Malaysia SST on foreign e-services 2020

Malaysia is to extend Sales and Services Tax liabilities to non-resident providers of electronic services from the start of 2020.

Currently, online domestic suppliers of digital services are subject to the tax meaning they have an uncompetitive tax position.

Electronic services subject to Malaysian SST coming under the new rules include: downloads/streaming media, subscriptions to online membership sites, e-books, online news/journals, apps, software and advertising services for online marketplaces.

Non-resident providers will have to register with the Customs Department before 1 January 2020. Previously, the Inland Revenue Board classified digital marketing payments to non-resident companies as royalty income and liable to pay Withholding Tax (WHT). This may create a double taxation liability, although B2B SST transactions may be classified under the ni-rated reverse charge.

SST replaced the 6% Goods and Services Tax in September 2018.