Malaysia News

Digital Service Tax

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Facebook and Google Malaysia have announced that a 6% Digital Tax will take effect on its service starting next year (01/01/2020).

 

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

  2. The threshold is RM500,000.00 and rate is 6%. The registered person need to file a quarterly return.

  3. Digital Service is any service that is delivered or subscribed over the internet or other electronic network which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.

  4. What Kind of Services Considered as Digital Service?

    • Software, application & video games (e.g. online licensing of software, updates and ad-ons website filters, firewalls, provision of mobile applications)
    • Music, e-book and film (e.g. provision of music, live streaming services, include subscription-based media / membership)
    • Advertisement and online platform (e.g. offering online advertising space on intangible media platform, offering platform to trade products or services)
    • Search engines and social networks (e.g. customised search-engine services)
    • Database and hosting (e.g. website hosting, online data warehousing, file-sharing and cloud storage services)
    • Internet Based Telecommunication (e.g. Cloud-PABX, VOIP Phone)
    • Online training (e.g. Provision of distance teaching, e-learning, online courses, webinar)
    • Others (e.g. Subscription to online newspapers and journals, provision of other digital content like images, text, information and payment processing services)

** The provision of the above is not considered as digital services if: The services can be obtained without the use of IT

  1. Digital Service Tax is a tax charged on:

    • Any digital service
    • Provided by Foreign Service Provider
    • To any consumer

  1. Foreign Service Provider is a person either business or individual outside Malaysia who provides digital services to consumer. FSP including person

    • Who sell digital products directly or
    • Who sell digital products indirectly through intermediaries such as online platform

  1. Online platform who makes transactions on behalf of the oversea service provider and issues invoice or any other document under their name, will be regarded as FSP

    For example: Amazing.com who provide online platform to trade services or goods. Customer will purchases game from COC through Amazing.com. Amazing.com will issue invoice to customer. Under this scenario, Amazing.com is considered as FSP and Amazing.com will account service tax on digital services.

  2. Consumer in Malaysia is any person who fulfils any two of the following:

    • Makes payment for digital services using credit or debit facility provided by any financial institution or company in Malaysia
    • Acquires digital services using an internet protocol address registered in Malaysia or an international mobile phone country code assigned to Malaysia
    • Resides in Malaysia

  3. Where any payment is received before the effective date in connection with the provision of digital services that will be provided on or after the effective date, NO service tax on digital services shall be charged on the payment received

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Minimum Wage Malaysia

PUTRAJAYA (Bernama): The government has decided to raise the minimum monthly wage to RM1,200 in major towns under 57 city and municipality councils while the minimum wage remains at RM1,100 a month for the rest of the country, says the Human Resources Ministry.

It said the new minimum wage will take effect from Jan 1, 2020, for all employers and the order would be gazetted soon in line with the decision.

Details on the minimum wage according to hours and days as well as workers paid according to piece rate, trip, commission, tonne and task would be provided under the new minimum wage.

According to a statement from the ministry, this follows the tabling of Budget 2020 and the decision of the Cabinet on Dec 6 on the implementation of the RM1,200 minimum wage per month in major towns.

The ministry said the minimum wage would be applicable to all workers in the private sector except domestic service as stipulated in the Minimum Wages Order 2018.

It said the decision of the government to increase the minimum wage in major towns was to assist workers in these areas to cope with the high cost of living.

Among the cities listed are Johor Bahru, Iskandar Puteri, Alor Setar, Melaka, Penang, Seberang Perai, Ipoh, Shah Alam, Petaling Jaya, Kuala Terengganu, North Kuching, South Kuching, Miri, Kota Kinabalu, Kuala Lumpur, while the major towns are Batu Pahat, Kluang, Kulai, Muar, Segamat, Pasir Gudang, Kulim, Sungai Petani, Langkawi, Kubang Pasu and Kota Bharu.

Also listed are Alor Gajah, Jasin, Hang Tuah Jaya, Seremban, Nilai, Port Dickson, Jempol, Kuantan, Temerloh, Bentong, Manjung, Kuala Kangsar, Taiping, Teluk Intan, Kangar, Ampang Jaya, Kajang, Klang, Selayang, Subang Jaya, Sepang, Kemaman, Dungun, Padawan, Sibu, Kota Samarahan, Bintulu, Sandakan, Tawau, Labuan and Putrajaya.

The ministry said the minimum wage rate would continue to be reviewed to ensure it is in line with current needs and with the objective of achieving a minimum wage of RM1,500 a month in the first five years of Pakatan Harapan’s administration.

 Source: The Star

Service Tax Group G Item 8 Information Tecnology Services

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  1. Information Technology is the Use of Any Computers, Storage, Networking and Other Physical Devices, Infrastructure and Processes to Create, Process, Store, Secure and Exchange All Forms of Electronic Data
  2. Service Tax on the supply will be charged at the point of services rendered
  3. IT Services Include:
    • Computing Services;
    • Coding and Programming;
    • Application Development;
    • Software Development;
    • System Integration;
    • Web Development;
    • Platforms;
    • Networks Integration;
    • Data Processing and Administration;
    • Cloud Services;
    • Artificial Intelligence;
    • Internet of Things
  4. Taxable IT services:
    • Provision of software by the software developer;
    • Services relating to the development, customization or provision of computer system (computer system refers generally to IT equipment and software that works together to perform some specified functions);
    • Installation or setting up of computer system;
    • Installation of software into hardware;
    • Software support and maintenance;
    • Periodic payments, subscription or maintenance for continued use and updates website related services, (eg development, customization, maintenance of webpage, websites, web portal and online platforms);
    • Updating to new version, upgrading or modification of data, system or software;
    • Managed data centre services, (eg managed service, connection charges);
    • Digital data services delivered through the internet;
    • Administrative fee for data, system or software;
    • IT advisory or consultation in relation to data and systems (hardware and/ or software)
    • Management on IT;
    • Training services (subject to service tax under Consultancy Services effective 1 January 2019)
  5. Exclude:
    • Charge on storage or co-location of hardware or server;
    • Physical security of hardware or server;
    • Sale and renewal of license for data, system and software by reseller, retailer or distributor of software;
    • Leasing or rental of computer, hardware and server;
    • Assembly of computer, hardware or server;
    • Operating system software embedded in hardware
  6. Effective 01 January 2019, ITS provider granted exemption from payment of service tax on ITS received by him. If:
    • The service that is exempted is an ITS, not other services received by ITS provider;
    • ITS provider who is the recipient of such ITS must be a registered person;
    • The ITS is provided by an ITS provider who is a registered person
  7. Responsibilities of ITS provider under B2B exemption is required to:
    • Issue invoices with the following additional particulars;
      • name and address of the customer;
      • the customer’s service tax registration number;
      • the customer’s total amount of service tax that are exempted
    • Declare the Total Value of Exempted Taxable Services (B2B exemption) to be made in column 18 (c) of SST-02 form.

For more information, kindly refer to https://mysst.customs.gov.my/ or our company Facebook https://www.facebook.com/ycsmanagement/

We do provide SST Registration Serice, Accounting Service and SST Reporting Service. Kindly refer to https://www.ycsaccounting.com.sg/our-services/malaysia/accounting for details. Please feel free to contact us at +607 – 225 4911 should you need more clarifications. Or you can just click HERE to contact us.

Malaysia Budget 2020 Tax

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NOTES – BUDGET 2020

This year, the Government has embarked on a comprehensive review and revamp of the existing incentive framework, comprising the Promotion of Investments Act 1986, Special Incentive Package and incentives under the Income Tax Act 1967. This new framework is expected to be ready by 1st January 2021.

Tax Identification Number (TIN)

Beginning January 2021, Malaysians above the age of 18 and corporate entities will be assigned a Tax Identification Number or TIN. In order to implement this initiative, engagement sessions with all stakeholders will commence next year.

 

Personal Income Tax

Personal Income Tax Rate

To ensure a more progressive personal income tax structure, it is proposed that a new band for taxable income in excess of RM2 million be introduced and taxed at 30%, which is a 2 percentage point increase from the current 28% rate.

Fertility Relief

The income tax relief of up to RM6,000 given on expenses incurred for medical treatment of serious illnesses will be expanded to include expenses incurred on fertility treatment.

Personal Tax Relief - Child

To ease the financial burden of parents who enroll their children in registered nurseries and kindergartens, individual tax relief for fees paid will be increased from RM1,000 to RM2,000.

Women

Women who have stopped working for a year or more, and are between 30 to 50 years old can enjoy the income tax exemption until 2023.

 

Corporate Tax

SME Tax Rate

The SME with paid-up capital of not more than RM2.5 million, income tax rate for Chargeable Income up to the first RM600,000 is 17%.

Electrical and Electronics (E&E) industry

The Government will also provide tax incentives to further promote high-value added activities in the Electrical and Electronics (E&E) industry to transition into 5G digital economy and Industry 4.0. These incentives include:

First: Income tax exemption up to 10 years to E&E companies investing in selected knowledge-based services

Second: Special Investment Tax Allowance to encourage companies in E&E sector that have exhausted the Reinvestment Allowance to further reinvest in Malaysia.

Automation

In addition, to encourage automation and to increase company’s productivity, it is proposed:

First: Accelerated Capital Allowance and automation equipment capital allowance for manufacturing sector on the first RM2 million and RM4 million incurred on qualifying capital expenditure is extended to the year of assessment 2023

Second: The incentive is also be expanded to include services sector on the first RM2 million incurred on qualifying capital expenditure from the year of assessment 2020 to the year of assessment 2023.

Building Digital Malaysians

 To ensure gains arising from successful Digital Companies are shared with the Rakyat, the Government will introduce the concept of Digital Social Responsibility (DSR). DSR is the commitment by businesses, to contribute to digital economic development while improving the digital skills of the future workforce with initiatives such as technology scholarships, training and upskilling for digital skills for communities in need. Contributions towards DSR by the companies will be given tax deduction.

Strengthening Access to Financing for Businesses

To further encourage alternative sources of funding for start-ups companies and to attract more foreign investment to Malaysia, tax incentives given to venture capital and angel investors will be extended until the year 2023.

Angel Investors: http://lampiran2.hasil.gov.my/pdf/pdfam/PR_11_2015.pdf

Venture Capital: http://lampiran1.hasil.gov.my/pdf/pdfam/PR_2_2016.pdf

Growing Islamic Finance

The current tax deductions on the cost of issuance and additional deduction on sukuk issuance costs under the principle of Wakalah will be extended for 5 years until year of assessment 2025.

To further promote Islamic fund and Sustainable and Responsible Investment (SRI) fund management activity, the tax exemption for fund management companies managing Shariah compliant funds and SRI funds, and the tax deduction on the cost of issuing SRI Sukuk will be extended for another 3 years until year of assessment 2023.

Green Growth and Energy for the Future

The Government intends to attain Malaysia’s goal to generate 20% of our energy consumption from renewable sources by 2025. Green Investment Tax Allowance (GITA) and Green Income tax Exemption (GITE) incentives will be extended to 2023. A 70% income tax exemption of up to 10 years will be given to companies undertaking solar leasing activities.

https://www.mida.gov.my/home/administrator/system_files/modules/photo/uploads/20181012163851_7.%20PowerPoint%20Presentation%20on%20Green%20Technology.pdf

Enhancing Research & Development (R&D) Framework

IP-generated income based on the Modified Nexus Approach (MNA) derived from patents and copyright software will be given tax exemption for a period of up to 10 years.

https://www.mida.gov.my/home/incentives-in-services-sector/posts/

Visit Malaysia 2020

First: Income tax exemption be given for organisers of approved arts and cultural activities, approved international sports recreational competitions, and conferences organisers

Second: New investments in international theme park projects will be given income tax exemption of 100% of statutory income or Investment Tax Allowance of 100% to be set off against 70% for 5 years

Third: Increasing tax deductions given to companies sponsoring arts, cultural and heritage activities in Malaysia from RM700,00 to RM1,000,000 per year

Fourth: Accelerated Capital Allowance for expenditure incurred on the purchase of new locally assembled excursion bus to be fully claimed within 2 years

Fifth: Excise duty exemption of 50% for locally assembled vehicles be given to tour operators for the purchase of qualified new tourism vehicles.

Apprentice

Government extend double tax deduction on expenses incurred by companies participating in Skim Latihan Dual Nasional (SLDN) for another two years.

The double tax deduction given to companies undertaking Structured Internship Programme (SIP) approved by Talent Corporation Malaysia Berhad (TalentCorp) will be expanded to include students from all academic fields rather than just engineering and technology.

Corporate Social Responsibility (CSR)

To further encourage the private sector to donate as part of their corporate social responsibility, Government will increase the donation reporting threshold to RM20,000 under Income Tax Act 1967 beginning 2020.

Donation

To inculcate philanthropy, tax deduction on donation for charitable and sports activities and projects of national interest will be increased to 10% from the aggregate income for tax payer. The tax deduction is expanded to:

First: Cash wakaf contribution to state religious authorities or a body established by state religious authorities administering wakaf

Second: Cash wakaf contribution to public universities allowed by the state religious authorities to receive wakaf

Third: Cash endowment contribution to public universities

Beginning 2020, tax exemption will be extended to religious institution or organization registered as a Company Limited By Guarantee with Companies Commission of Malaysia.

Real Property Gain Tax

In response to the public view regarding the Real Property Gain Tax (RPGT) imposed on disposal of properties after 5 years onwards, the Government will enhance RPGT treatment by revising the base year for asset acquisition at 1st January 2013 for asset acquired before 1st January 2013 as compared to the previous base year of 1 January 2000.

 

Sales and Service Tax

Digital Service Tax

Digital Service Tax will be implemented with effect from 1st January 2020, to include services such as, but not limited to downloaded software, music, video or digital advertising. Foreign service providers can commence registration with the Royal Malaysian Customs Department (RMC) as of 1st October 2019.

Training

All training and coaching services provided by training service provider to the disable persons will be exemption from service tax.

Christmas 2019

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Merry Christmas!!

Please be informed that both of our #Singapore and #Malaysia offices will be closed on the following dates:

25th December 2019 (Singapore & Malaysia - Christmas Day)
1st January 2020 (Singapore & Malaysia - New Year)