Lazada Malaysia ready for digital tax, to work closely with government

The Malaysian government is set to implement a digital tax on all foreign digital service providers from January 2020, and Lazada Malaysia says that they are ready to embrace the tax. According to Lazada Malaysia’s Chief Business Officer, Kevin Lee:

“We are happy to be at the forefront of this and work closely with many agencies of the government.”

The proposed amendment to the Service Tax Act 2018 legislation states that “any person who is outside Malaysia operating an online platform for buying and selling goods or providing services (whether or not such person provides any digital services) is to be considered as “foreign service provider”, which would seem to include platforms like Lazada.

Referring to Lazada’s position as a major e-commerce player in the nation (and in the Southeast Asian region), Kevin Lee says that Lazada has the responsibility to “drive the change behind the thinking, behind the policy” regarding digital tax.

But what, exactly, falls under the digital tax?

But there’s a certain amount of ambiguity here. Digital tax, referring to the proposed amendment to the Service Tax Act 2018, covers “foreign service providers” who sell goods or provide services in Malaysia. The purpose of this is purportedly to level the playing field for local businesses, while also generating more revenue for the Malaysian government from businesses that are not based in Malaysia.

The Managing Director of tax advisory firm, Axcelasia Taxand Sdn Bhd, Leow Mui Lee, reportedly said that there’s been a general misconception regarding the digital tax. According to Leow, the tax only applies to online services that require a payment to the company—not on every transaction made.

“This is incorrect as it will only be imposed on services paid to the online company or in application (app). Items under e-commerce have already been subjected to import duty and sales tax.”

So the tax would clearly apply to online service providers such as Netflix, or Spotify. But how does it apply to e-commerce players, or the dealers that operate within the ecosystem? Perhaps the most logical inference here would be that the MD is referring here to goods that are sold by local businesses on foreign-owned platforms/entities, such as Lazada. However, it would seem that foreign dealers/retailers that sell goods through e-commerce platforms would still be taxed.

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Subsequently, that raises some questions. Who handles the collection of said tax? As Lazada does not charge for usage of its platform (as far as consumers are concerned), what did Lazada Malaysia mean when they said that they are ready to embrace the digital tax?

We reached out to Lazada for further explanation on the issue, but they have no further comment on the matter at the moment. For now, it seems that we’ll have to wait for more clarification.

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