With effect from 1st January 2020, the Digital Service Tax (DST) imposed on foreign digital services officially kicked off in Malaysia. This brings a great impact on foreign companies including Netflix, Spotify, Google and even booking platforms such as Airbnb and Booking.com.
This service tax charged on digital services is an extension from the Sales and Services Tax (SST). With the introduction of DST, a new tax of 6% will be enforced and this largely affects not only foreign companies but also consumers and business players in Malaysia alike. In this post, we will help you to understand:
(1) What is DST and
(2) The steps involved for short stay hosts to make the DST payment.
What is Digital Service Tax (DST)?
The Digital Service Tax (DST) is a tax charged at a rate of 6% on a Foreign Service Provider (“FSP”) who is providing any digital services to any consumers in Malaysia.
Key Terms of DST include:
The meaning of several important terms are extracted from the Royal Malaysian Customs Department Digital Service Guide.
a) Digital Service
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.
b) Foreign Service Provider
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 (whether or not such person provides any digital services) and who makes transactions for provision of digital services on behalf of any person.
Any person who fulfils any two of the following:
- Makes payment for digital services using credit or debit facility provided by any financial institution or company in Malaysia;
- Acquires digital services using an internet protocol address registered in Malaysia or an international mobile phone country code assigned to Malaysia;
- Resides in Malaysia
How to Register for Digital Service Tax (DST)?
As a host, you will first need to find out how many Foreign Service Provider (FSP) you are using to advertise your listings. For many hosts, most likely you will list your short stay rental units on booking platforms. Others may be using other means such as Facebook and Google to advertise their listings. To make things simple for yourself, list down all the platforms where you have your units listed.
The next step is for you to check whether the platforms you used for your short stay business are registered for the SST. For this, you can easily check it by taking a look at your invoice issued by the booking platforms. If there are charges for SST; then, you will just need to pay for the SST as per the invoice issued.
What if there are no indication of SST charges on your invoice? An absence of SST charges implies that the foreign booking platforms are not registered for SST. In this case, you will need to make the payment on your own under the category of imported taxable services. This is where you will need to look back on whether your short stay business is a registered SST business or a non-registered SST business.
If your business is registered for SST, you will need to file for a payment using the SST-02 form every two months. For a non-registered SST business, you will need to complete the SST-02A form and make the payment at the end of every month.
The image as follows illustrates the process of the DST payment.
Looking for more information on DST? Download the guide here.