|“digital services” means any services that is delivered or subscribed over the internet or other electronic networks and which cannot be obtained without the use of information technology and where the delivery of the services is essentially automated – Section 2 of Service Tax (Amendment) Act 2019.|
It will depend on whether the Foreign service provider(s) is a Foreign Registered Person (FRP) with Customs Malaysia. FRP is required to issue their invoice(s) indicating the Service Tax portion (prescribed particulars required in accordance with Section 56G of Service Tax (Amendment) Act 2019).
If the Foreign service provider(s) is not FRP / does not register with Customs Malaysia, the service(s) acquired will be treated as Imported Taxable Services (i.e. Taxable Service(s) acquired by any person in Malaysia from any person who is outside Malaysia – Section 2 of Service tax Act 2018).
|Imported Taxable Services||Service Tax on Digital Services|
|Taxable services (including provision of digital services which come into operation on 01/01/2020) under the Service Tax Regulations 2018
Foreign service provider(s)’ invoice without service tax charged
acquired by businesses (B2B)
The business who acquired the services need to account for the service tax.
– Please click this link Imported Taxable Services and refer to “Manual for online declaration and payment” section
|Digital services defines under the Service Tax Act 2018
FRP’s invoice with service tax charged
acquired by businesses (B2B) or non-businesses (B2C)
Service tax will be paid to FRP who will account the service tax by using the DST-02 form.
– businesses and non-businesses just pay directly to FRP only
Effective from 01 Jan 2020, the Taxable Services have been expanded. E.g. “Taxable Services – Item (h) column (2) of Group G” expanded as below:-
“information technology services including distributing or reselling of information technology services on behalf of any person”;
Service Tax Exemption / Refund (by offsetting method)
|Custom’s Service Tax policies||Service tax exemption / refund|
|Service Tax Policy No 2/2020
|Service tax exemption on Imported Taxable Services|
|Service Tax Policy No 3/2020
|claiming refund via offsetting method
on service tax on imported digital service provided by foreign registered person.
Your business may be qualified for service tax exemption/refund (by offsetting method) if fulfilling the conditions stated in the Service Tax Policies as per links provided above.
- Service tax is required to be paid in both circumstance (i.e. Imported Taxable Services or digital services) as mentioned above unless fulfilling conditions as stated in service tax policies issued by Customs Malaysia.
- The company is required to pay “Withholding Tax (WHT) to the Inland Revenue Board (IRB)” in addition to the aforesaid “Service Tax paid to Customs” if the services provided fall within the ambit of WHT scope under Income Tax Act 1967.
e.g. 1 : Advertising services rendered by foreign companies such as digital marketing providers from Google, Facebook and etc. are subject to service tax and also fall within the scope of WHT.
e.g.2: Software downloaded / delivered by email from software provider will be classified as “Digital Service (if FRP)/ Imported Taxable Services” and subject to “service tax and also WHT”.
Please click Malaysian Withholding Tax for further information.
Disclaimer: All information above are presented for reference purposes & you are advised to contact the Customs or IRB for further information or your company’s appointed tax agent for more details.