During the Budget 2019 speech on 2 November 2018, the Minister of Finance announced that Malaysia will look to broaden the scope of service tax to foreign service providers who provide digital services to consumers in Malaysia. The government proposed to implement the imposition of service tax on digital services on 1 January 2020.

With the abolishment of Goods and Services Tax (GST) with effect from 31 August 2018 and the re-introduction of Sales Tax and Service Tax (“SST”), the government of Malaysia has taken a bold step to introduce Service Tax on digital services provided by foreign service providers.

With the much-anticipated service tax on digital services in Malaysia, the Royal Malaysian Customs Department (“RMCD”) has issued a guideline on 21 August 2019 to assist foreign service providers to understand the service tax implication on digital tax services.

We would like to highlight the key areas covered in the guide:

  • Definitions (based on Service Tax Act 2018)
  • Scope of Tax on Digital Services
  • The rate of service tax for Digital Services
  • Liability to register for Service Tax in Malaysia
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