KUALA LUMPUR (Dec 30): The Ministry of Finance (MoF) has announced five measures to prevent double taxation with the implementation of the 6% service tax on imported digital services come Jan 1, 2020. 

The first measure is by extending the group relief facilities to the importation of eligible taxable services by local service providers, which belongs to the same group of companies that provides the same imported taxable services.

In other words, local service providers do not need to be taxed on taxable services imported from overseas service providers that are in the same group, MoF said in a statement today.

The second measure is based on the “self-recipient accounting” method. This is where there will be exemption from accounting and paying service tax on importing professional and advertising services when the type of imported taxable services is the same service provided by the company.

Thirdly, local service providers who have paid service tax to foreign service providers on digital services for business-to-consumer (B2C), can make a refund claim from the Royal Customs Department of Malaysia and an offset is based on the actual amount of service tax paid.

MoF also said distance education services for preschool, primary and secondary education and tertiary education including vocational and professional training, provided online either by local or foreign service providers, are not categorised as taxable and not subject to service tax.

Additionally, it said online services such as e-newspapers, and educational, technical, scientific, historical or cultural journal or periodical reading materials, are also not categorised as taxable and not subject to service tax.

The government started to impose a 6% service tax on imported B2B services on Jan 1 this year, and is scheduled to impose a 6% service tax on imported B2C digital services starting Jan 1, 2020.

“The imposition of service tax on imported digital services is to ensure fair treatment to local service providers and to create a level playing field for both domestic and foreign service providers, on providing taxable services to businesses and consumers in Malaysia,” the ministry said.

“At the same time, the government acknowledges the issue of price increases and the cascading effect from double taxation on consumers. In this regard, the government has put in place several measures to ensure that service providers and local consumers do not face issues of double taxation,” it added. 

It should be noted that digital tax only applies to services and not goods.

MoF noted that the Customs Department will hold roadshows on the implementation of service tax on imported digital services to the public, as well as the local industry.