Updates on Indirect Tax: Digital Services

The Royal Malaysian Customs Department (RMCD) has released the following Service Tax amendments:

1.  Service Tax Policy No. 10/2020 dated 17 April 2020 [click HERE]. Digital services provided in connection with banking and financial services by local service providers is excluded from Service Tax effective 1 January 2020. The exemptions do not apply to the provision of digital services related to banking and financial services provided by foreign service provider to consumer in Malaysia.

2.  Following the Service Tax (Amendment) Regulations 2019 dated 30 August 2019 in relation to services provided under Group G (items (a), (b), (c), (d), (e), (f), (g), (h) or (i)) of the First Schedule provided by a Foreign Service Provider to any company within the same group of companies in Malaysia, such services shall not be treated as imported taxable services requiring application of the reverse charge mechanism.

RMCD has on 13 May 2020 released Service Tax (Amendment) Regulations 2020 and Service Tax (Digital Services) (Amendment) Regulations 2020, both dated 13 May 2020. Digital Services provided by the Foreign Service Provider to a company in Malaysia within the same group of companies, shall be excluded from Service Tax as well, but with some qualifications. This is best explained diagrammatically as below:-

We will keep you updated on any further guidelines and announcements to be issued by the Royal Malaysian Customs Department or other relevant authorities, if any.