Update key summary of service tax 6% on digital services

𝐎𝐯𝐞𝐫𝐯𝐢𝐞𝐰 SST on Digital Service

Effective from 1st January 2020, a service tax of 6% to be charged and levied on any digital service provided by a foreign registered person (FRP) to any consumers in Malaysia.

The Royal Malaysian Custom Department (RMCD) has issued an updated guide on digital services by FRP on 1st August 2020. The guide on digital services dated 20 August 2019 is withdrawn and replaced with this updated guide.

𝐊𝐞𝐲 𝐭𝐚𝐤𝐞𝐚𝐰𝐚𝐲

You will understand key updates from the guide:

1. Types of digital services not subject to service tax

2. No service tax on digital service provided within same group

3. Online platform operator as FRP

4. Additional guidance on total value of digital service

5. Impact on debit or credit note in return form

6. Application of refund

𝐒𝐮𝐦𝐦𝐚𝐫𝐲 𝐨𝐟 𝐤𝐞𝐲 𝐮𝐩𝐝𝐚𝐭𝐞𝐬

1. Types of digital services not subject to service tax

i. Online distance learning

For example: pre-school, primary, secondary or tertiary education including vocational education and professional training recognised by the relevant foreign authority.

ii. Online newspapers, online journals and periodicals

eNewspaper including printed digital version of newspaper under tariff code of 4902.10 and 4902.90;

Online journals and periodicals refer to online educational, technical, scientific, historical or cultural journals and periodicals under tariff code of 4902.90.10 00 and 4902.90.90.00.

2. Digital service provided within the same group of companies

Effective from 14th May 2020, FRP provides digital services to a company in Malaysia within the same group of companies is not subject to service tax.

3. Clarification of online platform operator

The online platform operator who provides digital services on behalf of any service provider is considered FSP if any of the following conditions are met:

i. Authorized to set the term and conditions of the underlying transactions;

ii. Has a direct or indirect involvement in the payment processing;

iii. Has a direct or indirect involvement in the delivery of the digital service;

iv. Provides customer support service in relation to the supplies provision of digital services;

v. The invoice or any other document provided to the consumer identifies the supply as made by the online platform operator.

4. Mandatory registration: threshold calculation for value of Digital Services

It provides additional guidance and examples to include the following categories when determine the total value of digital service:

i. Online platform operator considered as FSP; and

ii. FSP who sells directly to consumers in Malaysia and indirectly through an online platform operator.

5. Issuance of debit or credit note

FRP is allowed to issue debit notes and credit notes to consumers in Malaysia.

Impact of debit and credit notes in return form:

i. Debit note – declare the service tax when issued

ii. Credit note – to make amendment to DST-02 return related to the period for which the service tax has been paid. FRP may proceed with refund application.

6. Refund of Service Tax, Penalty, Fee or other Money

The DG may grant a refund of service tax, penalty, fee or other money to a person who:

i. has overpaid or erroneously paid; or

ii. is entitled to the refund under subsection 34(6) or 40(3)

FRP can make the application of the refund using the DST-ADM01 form through the MySToDS portal and submitted together with the relevant supporting documents.

Any application for refund should be made within one year from such overpayment or erroneous payment, or entitlement of the refund under subsection 34(6) or 40(3) occurred.

𝐒𝐨𝐮𝐫𝐜𝐞𝐬

Guide on Digital Services by Foreign Service Provider (FSP) – V2

https://mysst.customs.gov.my/assets/document/Industry Guides/GI/Guide on Digital Service_V2.pdf

Update key summary of service tax 6% on digital services

Update key summary of service tax 6% on digital services

 
 
tax, SSTKtp KtpSST, digital service, FRP