Facebook will charge 6% digital tax for ads starting next year

Facebook ads in Malaysia will be subject to a 6% digital tax starting January 2020, confirms the social media company. — AFP

Starting next year, Facebook will implement the 6% digital tax for advertisements in Malaysia.

On its help page, the social media company explains this will affect advertisers whose “Sold To” country listed on their business or personal address is set to Malaysia.

“The service tax is added whenever you're charged for your ads regardless of whether you're purchasing Facebook ads for business or personal purposes,” it says.

Facebook adds that if the user is paying for Facebook ads through a manual payment method, the tax is applied when the ad account is funded.

“As an example, let's say you were recently charged $100 because you reached your $100 billing threshold. The subtotal for the charge will be for $100 in ad costs, and then a 6% service tax will be added on top of that, so you'll pay $106.00 in total for that charge ($100 + $6 = $106),” it explains.

Since users are charged the tax in addition to the ad cost only when they hit the billing threshold, users will not automatically hit the threshold faster.

Instead they will have to pay more, to cover the taxes, when they hit the threshold.

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 digital advertising services by corporations like Google, streaming services like Netflix and Spotify and digital game distribution companies such as Steam.

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".

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