Overseas-based Digital Services

Paying more for many services

PETALING JAYA: Come March, Malaysians will pay more for living their daily lives, and that includes weekends.

Everything from leisure activities and outings to consulting a traditional or complementary medicine practitioner is expected to cost more with the service tax rate hiked to 8% from 6%.

The only exemptions are food and beverage, telecommunications and vehicle parking services.

Also in March, karaoke outlets and delivery services will be taxed 8%, along with brokerage and underwriting services.

Logistics services, which were not taxed previously, will also become taxable in March but at a rate of 6%.

According to a notice on the Customs Department website, the digital service tax for overseas-based digital services will see also a 2 percentage point increase to 8%.

This means that a RM55 monthly subscription for video streaming services may cost another RM13 a year.

Similarly, a student who pays a RM360 subscription for computer software will have to fork out an extra RM7 a year.

The digital services tax was gazetted in July 2019 and initially charged at a 6% rate for services including software, music, video and digital advertising effective January 2020.

Sources at the Royal Malaysian Customs Department confirmed that an announcement will be made soon.

“But let’s wait for the Finance Ministry,” said the source briefly.

It is learnt that the ministry is still fine-tuning the hikes.

“We need to gazette the subsidiary legislation. The decision has been made by the Finance Minister and communicated to the Customs Department,” said the source.

‘CLICK TO ENLARGE’

Among the services that now include the 6% service tax are cigarettes, ecigarettes, tobacco products and alcoholic beverages.

Also included are certain professional services, digital services (including electronic platform services), betting and gaming services, consultancy, training and security services.

Golf courses and driving ranges; courier and certain delivery services (other than to destinations outside Malaysia); domestic flight services; and the provision and issuance of charge cards or credit cards are also included.

All of these will likely be hit with the increased rate of 8%.

Basically, this means we will be paying more even if we decide to stay home and watch a movie on a subscription-based digital service platform.

Last month, traditional Chinese medicine (TCM) practitioners were shocked to learn that their business was parked under the taxable “Category C”, which also includes premises like massage parlours, health and wellness centres as well as nightclubs and dance halls.

Patients will thus have to pay higher prices for TCM services such as acupuncture, cupping therapy, tui na and gua sha. Complementary medicine – a branch of the country’s healthcare system – that includes Malay and Indian practices will also be taxed at the 8% rate.

The increased service tax comes in the wake of the low-value goods (LVG) tax which started earlier this month. It covers all imported low-value goods priced at RM500 and below purchased online.

The high-value goods tax (HVGT) is expected to start in May at a rate of between 5% and 10%. It is expected to be imposed on big-ticket items such as private jets and yachts, jewellery, luxury time pieces and luxury cars.

For business owners, the capital gains tax (CGT) for the disposal of unlisted shares by local companies will also roll out from March 1.

However, the government has announced that CGT will not be imposed on foreign-sourced income (FSI) on unit trusts, at least until Dec 31, 2026. The disposal of listed shares and disposals by individuals will also not be subjected to CGT, at least until Dec 31, 2028.

In the second half of 2024, the government is also set to roll out a new RON95 fuel targeted subsidy programme, which would see a segment of society paying higher prices at the pumps.

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