Malaysia caught up with the global trend of taxing cross-border supplies of digital services by introducing a 6% service tax on imported digital services (SToDS), starting January 1, 2020. That said, unlike similar goods and services tax (GST) or value-added tax (VAT) regimes in other countries, the Malaysian SToDS regime imposes the tax on both individual and business consumers in Malaysia, which took most Malaysian businesses by surprise.
Business raised various concerns regarding the implications of the widening of the service tax net to capture cross-border supplies of digital services and the Malaysian government has since introduced measures to refine the SToDS regime in response to the concerns raised.
- Preventing Double Taxation
- Refund Mechanism for Local Service Providers
- Exemptions for Online Distance Learning Services and Online Newspapers, Journals and Periodicals
- Intra-Group Relief
- Collecting Information on “Consumers”
- Challenges Remain.