Budget 2020: Government confirms digital services tax, introduces Tax Identification Number

The digital service tax that was announced during the earlier Budget 2019 has been confirmed during Budget 2020 to begin on the 1st of January 2020. This will cover all digital services, including download/streaming of content, music, video, or digital advertising. Foreign entities that will be subject to the tax will need to register with Malaysian Customs from the 1st of October onwards.

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 Government has also said that the 6% tax isn’t high comparatively. Norway, for instance, has a digital services tax of 25%.

Tax Identification Number

In addition to that, there will also be a Tax Identification Number (TIN) for all companies or individuals that are 18 years above in age and have an income source.

This would mean that even individuals who draw income via the internet will be given these identification numbers, beginning from January 2021. Next year, the Government will organise sessions to ensure that this initiative is implemented properly.

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