Google is adding on a 6% digital tax charge beginning 1 January 2020. Currently, the tax charge is applicable to its Google G Suite account holders, which includes apps such as Gmail, Docs, Hangouts, Slides, Drive, and Calendar. According to Google, the amount of service tax charged will be reflected as a separate line in “Transactions” under “Billing and Payments”. It added that consumers’ invoice will show the amount of service tax charged.
When asked if the tax will impact marketing partners, Google’s spokesperson told A+M that it is unable to get into the specifics, but confirmed that consumers with a billing address in Malaysia will be subjected to the tax.
The 6% digital tax was first announced during Budget 2019, which will be charged and levied on any digital service provided by a foreign registered person to any consumer in Malaysia, according to the Royal Malaysian Customs Department. Its Service Tax Industry Guide defines digital service as “any service that is delivered or subscribed over the internet or other electronic network and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated”.
Meanwhile, foreign service provider is defined as “any person who is outside Malaysia providing any digital service to a consumer and includes any person who is outside Malaysia operating an online platform for buying and selling goods or providing services, and who makes transactions for provision of digital services on behalf of any person”. Services expected to be impacted include Netflix, Spotify, and Google.
Finance Minister Lim Guan Eng said during last year’s budget tabling that these measures will neutralise the cost advantage faced by physical retailers against their virtual storefront counterparts, especially those operated by foreign entities. Shortly after the announcement of the digital tax by the Malaysian government last year, the Singapore parliament passed a Goods and Services Tax (Amendment) Bill that allows the government to collect GST from overseas services from the year 2020. These include video streaming, apps, listing fees on electronic marketplaces, software and online subscription fees.
Business-to-consumer consultancy and advisory services will be subject to GST if the services meet the definition of digital services. This is if the service supplied over the internet or other electronic networks has minimal or no human intervention. Overseas suppliers with a total value of supplies amounting to SG$1 million at the end of the year 2019 or any subsequent calendar year, and with its digital supplies exceeding SG$100,000 will be required to pay GST. However, tax will not be charged on any supply of services that takes place before 1 January 2020.