Tax highlights from your advisers Guide on Digital …Head of Tax Dispute Resolution [email protected] +603 7721 7019 Bob Kee Executive Director – Head of Transfer Pricing [email protected]
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Tax Whiz 2020 | Guide on Digital Services by Foreign Service Provider as at 1 August 2020
Guide on Digital Services by Foreign Service Provider
Set out below are some of the notable updates. For further details, please click here for a copy of the Updated Guide at MySST website.
This Guide is for digital services provided by a FSP. For digital services provided by a Malaysian service provider, it will be covered separately in the Guide on Information Technology Services [yet to be made available].
Further ‘definition’ of digital services, which includes, “the service:
i. That is to be delivered through information technology medium or other electronic network;
ii. Cannot be delivered without the use of internet technology;
iii. That to be delivered to consumer is essentially automated. The term essentially automated may refer to the nature of the service when it is to be delivered as with minimal or no human intervention from service provider. For example, when the digital service is to be provided to consumer, service provider does not have to interfere or carrying or perform any activities, but the consumer will be able to acquire or download the digital services themselves.”
The Royal Malaysian Customs Department (“Customs”) has issued an updated Guide on Digital Services by Foreign Service Provider (“FSP”) as at 1 August 2020 (“Updated Guide”). The Updated Guide replaced the earlier version dated 20 August 2019.
Tax Whiz 2020 | Guide on Digital Services by Foreign Service Provider as at 1 August 2020
Clarification and additional examples on persons considered as FSP, including online platform operators.
An online platform operator is considered as a FSP if any of the following conditions are met:
a) The online platform operator authorizes/ sets the term and conditions of the underlying transactions
b) The online platform operator has a direct or indirect involvement in the payment processing
c) The online platform operator has a direct or indirect involvement in the delivery of the digital service
d) The online platform operator provides customer support service in relation to the provision of digital services
e) The invoice or any other document provided to the consumer identifies the supply as made by the online platform operator
The value of digital services sold indirectly through online platform operator will be taken into account as the total value of digital services made by the online platform operator, not the FSP.
One of the tests that the foreign registered person may consider to determine “consumer in Malaysia” is the recipient’s country selection upon registration/ purchase is in Malaysia. Where the digital services is provided periodically and charges are imposed on a periodic basis, the foreign registered person shall use the information provided by the consumer during subscription or registration unless the consumer updates the status.
The intra-group relief facility for digital services provided within the same group of companies, which was effective 14 May 2020, is reiterated.
Service Tax is due at the time when payment is received from consumers, unless special approval has been obtained from the Director General of Customs to account on invoice basis.
Foreign registered person is allowed to issue debit notes and credit notes to consumers. In the case of debit note, the Service Tax is due at the time the debit note is issued or payment is received. In the case of credit note, any adjustment (where Service Tax has been declared and paid) is done via the DST-02.
Where there is a Service Tax refund due to overpayment, erroneous payment or exemption, an application shall be made online via the DST-ADM01 form, together with the relevant supporting documents. Note that there are conditions to qualify for such refund.
The transitional rules have been updated to align with Section 52 of the Service Tax (Amendment) Act 2019, i.e.:
− For the provision of digital services spanning 1 January 2020, the proportion of such services which is attributed to the part of the period on or after 1 January 2020 is subject to Service Tax.
− For the provision of digital services before or after 1 January 2020 (non-spanning), only digital services which is provided on or after 1 January 2020 is subject to Service Tax.
− Where any payment is received before 1 January 2020 in connection with digital services to be provided on or after 1 January 2020, no Service Tax shall be charged on the payment received.
Note that the Guide on Digital Services by FSP – Guideline on:
• Application for Registration as FRP (Section 56C, Service Tax Act 2018 “SeTA2018”)
• Furnishing DST-02 Return of SToDS (Section 56H, SeTA2018)
• Payment of SToDS (Section 56I, SeTA2018)
as at 30 March 2020 is still available at the online portal for Service Tax on digital services (“MySToDS”). For further details, please click here for a copy of the guide at MySToDSwebsite.
The contents in the Guide dated 30 March 2020 is largely consistent with the Updated Guide (as at 1 August 2020).
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
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