What digital services are subject to the new 6% digital tax?

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Digital Services Subject to the 6% Tax

At least 126 foreign digital service providers, including prominent names like Google, Netflix, Spotify, and Airbnb, have registered for Malaysia's 6% digital tax, which commenced on January 1. This tax applies to a broad spectrum of digital services provided to Malaysian consumers.
Categories of Taxable Digital Services

The digital services subject to the 6% tax encompass a wide array of online offerings. These include software and applications, video games, and various forms of online subscriptions. Additionally, streaming services, online advertisements, and online trading platforms fall under this category. The scope also extends to online training, payment processing services, search engines, and social networks. Furthermore, database and hosting services, along with internet-based telecommunication services, are included in the taxable list.
Registration Threshold for Foreign Providers

Foreign companies offering digital services are mandated to register with the Customs Department if the annual value of these services provided to Malaysian consumers surpasses RM500,000. This threshold is a key determinant for eligibility and subsequent registration for the digital tax. As of December 20, 126 such providers had completed their registration, with ongoing efforts to identify and invite other eligible companies.
International Comparison of Digital Tax Rates

Malaysia's 6% digital tax rate is positioned as the lowest among several countries that have implemented similar taxation measures. For comparative purposes, Norway imposes a 25% rate, Russia levies 18%, and New Zealand charges 15%. These rates were introduced in Norway in July 2011, Russia in January 2017, and New Zealand in October 2016, indicating a global trend towards taxing digital service transactions.
Impact on Consumers and Providers

The implementation of the digital tax signifies an extension of existing taxation to foreign digital service providers, as the tax was already applicable to local entities. Companies like Google have already indicated their intention to pass on the 6% tax to users of services such as G Suite. Similarly, platforms like Facebook will apply the tax to advertisements, and Sony's PlayStation Store will include it for subscription services and purchasable items.

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What digital services are subject to the new 6% digital tax?

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