Remember when Malaysia caught up with the global trend of imposing a 6% digital services tax on foreign digital service providers (FSPs)? Well, it's now in its second year of implementation. So what has changed and what should you take note of? 🤔
We have highlighted some key information to help you understand this topic better. Everything you need to know from the scope of tax and taxable period to the registration process and compliance issue - we got you covered!
IMPOSITION AND SCOPE OF TAX
Effective 1st January 2020, service tax of 6% shall be charged and levied on any digital service provided by a foreign registered person (FRP) to any consumer in Malaysia.
Foreign service provider (FSP) is mandatory when the total value of digital services provided to a consumer in Malaysia exceeds RM500,000 per year
WHAT KIND OF SERVICES CONSIDERED AS DIGITAL SERVICE?
Services:
that is to be delivered through information technology mediumor other electronic network
cannot be delivered without the use of internet technology;
that to be delivered to consumer is essentially automated
Examples: Software, application & video games; Music, e-book and film; Advertisement and online platform; Search engines and social networks, Database and hosting; Internet Based Telecommunication; Online training etc.
APPLICATION FOR REGISTRATION
FSP who is liable to be registered under the implementation of service tax on digital services (SToDS) shall apply for registration not later than the last day of the month following the month in which he exceeds threshold of RM500,000.
HOW TO REGISTER?
FSP has to complete DST-01 form online through MySToDS system.
CANCELLATION OF REGISTRATION
FRP may apply to cancel his registration if his liability to be registered has ceased. The registration of any person may also be cancelled by Director General of Customs (DG) if it is found that
the person is not liable or eligible to be registered.
Application for cancellation of registration can be made online through MySToDS system. FRP will be notified on the approval and the effective date of cancellation.
ISSUANCE OF TAX INVOICE
FRP is required to issue an invoice or a document containing prescribed particulars to the consumer in respect of the transaction.
The invoice or document shall state the following particulars:
Date of invoice
Registration number of the FRP
A description sufficient to identify the digital services provided
The total amount payable excluding service tax, the rate of service tax and the total service tax chargeable shown as separate amount
TAXABLE PERIOD
Every Foreign Registered Person (FRP) will be assigned a taxable period for which he is required to account for SToDS. The taxable period shall be a period of three months (quarterly) ending on the last day of any month of any calendar year under subsection 56H(1) STA 2018 for the purpose of DST-02 return submission.
DUTY TO KEEP RECORDS
FRP shall keep complete and true records written up to date of all transactions which affect or may affect his liability to service tax on digital services, including the following records:
all records of provision of digital service by the FRP including invoices and any document; and
all other records related to service tax on digital services.
COMPLIANCE AND ENFORCEMENT
Failure to comply to any provision under STA is an offence and subject to penalty. Penalties may apply in the following scenarios:
Failure or late application for registration
Late or non-filing of DST-02 returns
Submission of incorrect DST-02 returns
Late or non-payment of service tax on digital services due
Failure to issue invoice or document as required by the Act
Failure to keep records
Further information can be obtained from https://mystods.customs.gov.my/
Need help with the registration, issuance of invoice or anything related to the digital services tax? Reach out to us via https://wa.me/60122192492 😊
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