On 14 February 2024, the Royal Malaysian Customs Department released guidelines concerning transitional rules about adjusting the service tax rate from 6% to 8% on digital services provided by foreign registered persons (RFPs). Regarding digital services offered by FRPs, all digital service supplies to consumers will be taxed at 8% starting 1 March 2024. Transitional rules are outlined in the Service Tax (Rate of Digital Services Tax) (Amendment) Order 2024.
The key points of the guidelines are as follows:
- Where any digital service is provided by FRP before the effective date, and the service tax for the related digital service is due before the effective date, service tax shall be charged at the old tax rate of 6%;
- Where any digital service is provided by FRP on or after the effective date, and service tax for the related digital service is due on or after the effective date, service tax shall be charged at the new tax rate of 8%;
- Where digital service is provided by FRP before the effective date and is spanning on or after the effective date:
- For the proportion of digital services attributed to the period before the effective date, service tax shall be charged at the old tax rate of 6%, and;
- For the proportion of digital services attributed to the period on or after the effective date, service tax shall be charged at the new tax rate of 8%;
- When payment is received before the effective date in connection with the provision of digital services that will be provided on or after the effective date, service tax shall be charged at the old tax rate of 6% on the payment received.
