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Google & Facebook to impose 6% service tax in Malaysia

Starting January 2020, Google and Facebook will charge 6% service tax. This affects advertisers whose “Sold to” country on their business or personal address is set to Malaysia. it was introduced during Budget 2019 and brought up again during Budget 2020 by Finance Minister Lim Guan Eng, stating the Digital Service tax will be fully effective starting January 1, 2020.

digital tax

This means brands and agencies will be impacted will an extra cost of 6% on top of the 8% to 10% withholding tax that they are already paying. Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and paid to the Inland revenue Board of Malaysia.

Google has confirmed the 6% will be applicable on G Suite services. The tax will be charged on user purchases and reflected under Billing & Payments.

Apparently the 6% digital tax rate is considered low compared to other countries according to the Government.

digital tax

Examples of digital services include software, application, videogames, music and film streaming services, subscription-based media, database and cloud storage services, advertising and online platform (including online advertising space on intangible media platform and offering a platform to trade products or services), as well as search engines and social networks, among others.