What is the annual revenue threshold for foreign digital service providers to register?

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Annual Revenue Threshold for Digital Tax Registration

Foreign companies providing digital services to Malaysian consumers must register with the Customs Department for the digital tax if their annual service value exceeds RM500,000. As of December 20, 126 foreign digital service providers, including prominent names like Google, Netflix, Spotify, and Airbnb, had already registered for the 6 per cent digital tax, which is set to be implemented from January 1. The Customs Department employs a "soft approach" for implementation, issuing notices to companies that reach the registration threshold.
Definition of Digital Services

The Customs Department categorises digital services broadly to encompass a wide range of online offerings. This includes software, applications, video games, online subscriptions, and streaming services. Additionally, online advertisements, trading platforms, training, payment processing, search engines, social networks, database and hosting services, and internet-based telecommunication are all included under this definition.
Examples of Registered Providers

A significant number of foreign digital service providers have proactively registered for the digital tax. As of December 20, the Customs Department confirmed that 126 such entities had completed their registration. This list includes globally recognised platforms such as Google, which has stated it will apply the 6 per cent tax to its G Suite users, and Netflix and Spotify, known for their streaming services. Online marketplace Airbnb is also among the registered entities.
Tax Rate and International Comparison

The digital tax rate in Malaysia is set at 6 per cent. This rate has been noted by Deputy Finance Minister Datuk Amiruddin Hamzah as being among the lowest globally for such taxes. For comparative purposes, Norway imposes a 25 per cent digital tax, Russia has a rate of 18 per cent, and New Zealand's rate stands at 15 per cent. These international rates were introduced in July 2011, January 2017, and October 2016, respectively.
Impact on Government Revenue

The introduction of the digital tax on foreign digital service providers is anticipated to provide a substantial boost to the Malaysian government's revenue. Previous reports indicated that this measure could potentially increase the government's tax earnings by approximately RM2.4 billion annually. This projected increase underscores the government's strategy to broaden its tax base and capture revenue from the growing digital economy.

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What is the annual revenue threshold for foreign digital service providers to register?

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