KUALA LUMPUR: Foreign-registered digital service providers will be taxed 6% beginning Jan 1 next year after the Dewan Rakyat passed the Service Tax (Amendment) Bill 2019 on Monday (April 8).
Deputy Finance Minister Datuk Amiruddin Hamzah said the move was to create a level playing field for service providers.
"It is not fair for local service providers to be subjected to taxes when foreign providers are exempted. The service tax (for providers) is not new, we are just expanding the scope of it," he said when winding up during the debates on the Bill.
Amiruddin said other countries have already started charging such service providers while some are in the midst of coming up with similar laws in their respective nations.
Among the countries that have already started charging such taxes include Russia, Korea, Norway and New Zealand, among others.
Amiruddin said that Norway charges 25% while Russia and New Zealand impose 18% and 15% respectively.
"So Malaysia charging 6% isn't a big deal," he added.
On compliance of the tax by foreign providers, Amiruddin said he is confident that they will comply as they would want to safeguard their image.
He also said that there will be government-to-government cooperation that can help Malaysia to comply with errant providers.
"We can ask the respective governments to take action against the companies that refuse to pay the taxes," said Amiruddin.
However, he said the challenge lies for smaller companies providing services.
"But we believe they are ambitious to expand their companies, so they will do what is necessary," he said.
Other Bills that were passed include the Customs (Amendment) Bill 2019, the Excise (Amendment) Bill 2019, the Free Zones (Amendment) Bill 2019 and the Sales Tax (Amendment) Bill 2019.