Google Malaysia has announced that a 6% digital tax will take effect on its service starting next year.
“We always comply with the tax laws in every country we operate in, and we continue doing so as tax laws evolve. To be in compliance with Malaysia’s new Sales & Services Tax, we will charge a 6% Services Tax to our clients in the country, starting from January 1, 2020, once the law comes into effect," a Google spokesperson said in a statement to The Star.
So far, Google has confirmed that the 6% will be applicable on G Suite services. The tax will be charged on user purchases and reflected under Billing & Payments.
The spokesperson said to wait for further announcements for other services such as YouTube Premium, YouTube Music and online purchases for digital items such as e-books, mobile applications, movies on Google Play. Users will be notified about any possible pricing changes via email.
The Malaysian government first announced that a 6% digital tax will be imposed on foreign service providers effective Jan 1, 2020 at last year's Budget tabling.
The tax is expected to affect streaming services like Netflix and Spotify, digital advertising services offered by corporations like Google, and also digital game distribution companies such as Steam. Foreign companies providing such services have been allowed to register with the Customs Department from Oct 1.
Registration for foreign service providers is mandatory when the total value of digital services provided to a consumer in Malaysia exceeds RM500,000 per year.
According to the Royal Malaysian Customs Department's Service Tax Industry Guides, digital services is defined as "services that is to be delivered through information technology medium with minimal or no human intervention from service provider".
Examples of digital services include software, application, videogames, music and film streaming services, subscription-based media, database and cloud storage services, advertising and online platform (including online advertising space on intangible media platform and offering a platform to trade products or services), as well as search engines and social networks, among others.