Official: Foreign firms must register to offer online services here

Ministry of finance director of national budget, Johan Mahmood Merican speaks to reporters Putrajaya November 7, 2018. — Picture by Shafwan Zaidon
Ministry of finance director of national budget, Johan Mahmood Merican speaks to reporters Putrajaya November 7, 2018. — Picture by Shafwan Zaidon

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PUTRAJAYA, Nov 7 — Providers of international online services must register with Malaysian tax authorities in order to continue offering these in the country, said National Budget Office (NBO) head Johan Mahmood Merican.

He explained that this was the first step towards implementing the digital tax announced as part of Budget 2019.

“This effort should be done in phases as the first phase is more to business-to-business (B2B) for imported services and the second one is imported online services,” he explained.

He was speaking after the briefing on the 11th Malaysia Plan Mid-term Review and 2019 Budget at Ministry of Communication and Multimedia today.

Johan also said today that the so-called digital tax will first be imposed on business-to-business transactions for online services starting January 2019.

The tax on consumer-level online services such as the Spotify and Netflix streaming services and the Steam online game store will begin in 2020.

The digital tax was to ensure a level playing field between local and foreign online service providers, he explained.

Citing the example of iflix, a regional competitor to Netflix, he said the former was liable to local taxes not currently applicable to the US-based firm.

Finance Minister Lim Guan Eng proposed taxing digital services starting from 2020 in his tabling of Budget 2019 last Friday.

Lim said the types of online services that are affected include software, music, video and digital advertising.

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