Malaysia’s service tax increased from six percent to eight percent on digital services. This was ratified on February 24, 2024 by the second Minister of Finance Amir Hamzah bin Azizan and will be effective on March 1 of this year.
What is a digital service?
According to the official government website on the service tax, digital service refers to any kind of service rendered over the internet or other electronic network and “which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.”
The service tax is charged to any digital service “provided by a foreign registered person (FRP) to any consumer in Malaysia.” The term consumer describes an individual who meets any two of the criteria below:
- Uses a credit or debit facility provided by a financial institution or company in Malaysia to pay for digital services
- Procures digital services through an internet protocol address identified with Malaysia or a mobile country code assigned to Malaysia
- Is a Malaysian resident
What will be affected by this order?
According to the order, digital services that commenced before March 1 but will end on or after that date will be taxed eight percent.
Meanwhile, if a payment for the service is given before March 1, even if the service will be rendered on or after, the tax will remain at six percent.
What about other services?
Some services will still be taxed at six percent. This include:
- Logistics (a new service category replacing courier and warehousing services)
- Food and beverage
- Telecommunications
- Parking
Other services will be taxed at eight percent. This includes the addition of two other new service categories: karaoke services and brokerage and underwriting services.
This was announced last year by Malaysian Prime Minister Datuk Seri Anwar Ibrahim in his Budget 2024 speech.
